Sara Routhier, Managing Editor and Outreach Director, has professional experience as an educator, SEO specialist, and content marketer. She has over five years of experience in the insurance industry. As a researcher, data nerd, writer, and editor she strives to curate educational, enlightening articles that provide you with the must-know facts and best-kept secrets within the overwhelming world o...

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: Oct 22, 2012

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Money has always played a dominant role in elections. Without it there would be no funding for the expensive commercials, mail packets, signs, and campaign office staff necessary to winning an American election. While campaign contributions are certainly the most well known form of campaign funding, personal financing is also equally as common.

Personal financing comes in the form of unsecured or secured personal loans. Unsecured personal financing has no collateral involved. The borrowing of secured personal loans, on the other hand, requires collateral, which can be any asset of value. The use of personal financing, whether in the form of unsecured or secured personal loans, is generally frowned upon in elections but still legal.

Politicians and electoral candidates use their own wealth to inject their campaigns with money. This financing must be repaid by campaigns and, like all forms of debt, accrues interest. As a result, candidates can theoretically make a profit, even in a defeat. It may be easy to assume that only large elections, such as Presidential elections or Senate elections, involve unsecured or secured personal loans. However, as several stories have shown, this financing is as ubiquitous as spin and slander in elections.

Take for example a current battle for a Congressional seat.

In Seattle, Republican Congressional candidate Bill Driscoll gave his campaign $500,000 in personal financing. Thanks to this financing, Driscoll’s campaign funds total over $1 million, according to Seattle Weekly.

For all their power though, sizable personal loans in the hundreds of thousands do not guarantee a victory. Driscoll is facing off against a Democratic candidate that has far more endorsements. The battleground is also in a left-leaning city. Perhaps such factors necessitate such massive personal financing to help give underdog Republicans in the area a fighting chance. Driscoll’s opponent, Derek Kilmer, has seized the opportunity to claim that the $1 million in personal financing is simply another sign of a plutocrat attempting to enter politics.

In contrast to Driscoll, Kilmer raised roughly $500,000 from political committees affiliated with unions, businesses, medical groups, Indian Tribes, and the Democratic Party. On top of that, Kilmer also obtained $993,000 from 3,100 individual donors. With Kilmer having raised nearly $1.5 million in campaign funds, perhaps Driscoll is simply giving personal financing to his own campaign in desperation.

But personal financing isn’t exclusive to federal elections, as it even rears its head at the county level.

In Santa Cruz, CA, the election for county supervisor has also seen the use of personal financing. Upstart Democratic-backed candidate Eric Hammer has raised $70,000, some of which is made with personal financing. He hopes to win against veteran politician Bruce McPherson, according to the Santa Cruz Sentinel.

Then there’s the city level.

In the race for city council in Montclair, CA, Richard Beltran, backed by the local Fire Fighters and Police Associations, has used $18,000 in personal financing to fund his campaign, according to the Inland Valley Daily Bulletin.

These ongoing incidents involve the unsecured and secured personal loans that candidates have lent to their own campaigns. However, they do not reveal how many individual donors, donating organizations, and constituents have used secured personal loans by giving up collateral in exchange for money to throw at a candidate of their choice.

Using personal financing, even in the form of secured personal loans, allows those with deep pockets to fund to their hearts’ content. Reformed election laws that only permit contributions would be far more representative of constituents showing their support for candidates. When people give up their hard earned money to contribute to political campaigns they believe in, they show their belief in the American system. As a country we must still strive for these kinds of practices in spite of the cynicism wrought by economic recession.