How I Make Money While I Sleep With my Prosper P2P Lending Account! Passive Income!

hey guys what's up this is Jesus

certified financial planner with advised

edge and host of fighting words

financially today I want to talk about

one way to make money while you sleep

yeah baby and I'm talking about passive

income the way to make money to actually

to get your money to make money and you

don't have to do anything at all and the

type of passive income we're going to

talk about today is peer-to-peer lending

now I'm pretty excited about talking

about Peter peer lending today because

since I started my own company last


I can finally actually engage in active

peer lending before when I worked for a

number of financial companies they

considered it a conflict of interest for

one reason or another I certainly didn't

see it that way but I have a small


I just wasn't allowed to actively trade

in it for a long time

or how did we make investments but now

that I'm on my own and I'm not in the

business of lending money and I'm not in

the business of selling products there's

new content conflict of interest

whatsoever and I can talk about this -

why are it's good that first I'm going

to talk about how peer to peer lending

works both from the perspective of the

borrower and the investor now if you're

watching this you're probably more

interested in the investor side and I'm

definitely going to concentrate on the

investor side second I'm actually gonna

show you guys my own personal account

I've had one since I think roughly 2011

or so so it's been quite a long time I

had a little bit of money than at first

and it's only been over the last two

years a show that I've been able to

contribute more funds into it but I'm

gonna show you the nitty-gritty of how

it works how much money I've made and

all that third we're gonna go over some

of the limitations and the negative

sides of peer-to-peer lending in

gentlemen and finally if you stick

around long enough to the end of the

video I'll talk about why I'm really

excited about this type of investing and

why am I putting a lot more money into

the future and why it looks like it's

going to be a permanent part of my

investment portfolio a little disclaimer

before I get started on showing you guys

my account I'm not being paid by prosper

com Lending Club or any other

peer-to-peer lending service it's not

that I wouldn't like to be part of an

affiliate program and get paid when you

guys sign up through one of my videos

it's just that I don't have enough

subscribers to qualify right now and you

already know I guess that means it's a

good time

for me to ask you guys just subscribe

and hit the like button so I can

eventually get on these affiliate

programs alright let's get into my

account hold on just a minute while


okay folks this move myself to the

corner this is my peer to peer lending

account with prosper calm what is peer

to peer lending Peter peer lending also

known as p2p lending is a technology

enabled system like you through a

website or an app where individual

investors fund loans or small portions

of loans to individual borrowers it's

also called marketplace lending and

peer-to-peer lending is really growing

as an alternative to traditional lending

so I started this account now long ago

in 2011 and literally three months after

I started the account I started working

for a new company and they said hey you

can't have an actively treated account

or actively managed account in this you

just have to let the loans go so for

years I put I think I put four hundred

dollars in initially and then didn't put

any more money into it at all until 2018

and from 2018 on I don't think I'd put

more than about twenty five dollars a

month more now I might have put in

twenty five dollars twice a month a

couple of times but it hasn't been much

more than that

so probably looking at you know a total

of less than $1,000 investment and it's

just grown over time but what it's

really given me over time is a an amount

of a good amount of data where I can

actually look the performance the

account and I could say this is what's

work this is what hasn't worked and I

can talk about some of the changes that

have gone over the account so if you

look the total value of my account here

is two thousand four hundred and sixty

six dollars and 35 cents you know what

I'm sure probably tell my wife about

this I don't even think she knows that

I've been doing this so the amount of

cash that I have in here that's $40 53

cents the amount of notes which is uh

notes there's this 2004 25 dollars and

81 cents the amount of notes is actually

the amount of loans that I have out

there alright so and if you look at this

next number the annualized return on

those notes is five point three five

percent now that's not bad it's it's not

great but it's not bad

it's not stock market returns but then

again this is not a stock market

investment this is not a bond investment

this is something complete

different this is a microloan investment

when I talk about micro loans I don't

think that I have a single note in this

portfolio that is more than $25 I don't

think that I do alright so we're going

to talk about how that is like so if you

are an investor and you're coming in to

look at these at these these different

borrowers what you want to do is you

want to browse the listings and I'm

gonna saw this is one way to do it and

this is one of the ways that I made some

mistakes early on is that I would browse

the listings every day and I would sort

of pick and choose which ones I wanted

to write so if you browse the listings

you can see what's out there to bid on

today today you can see the the rating

here is double-a for this person who

wants to do debt consolidation they want

to borrow $14,000 the yield on the loan

that they're taking out is going to be

six point four nine percent meaning

that's the interest rate that they're

going to be charged so this alone is

five hundred ninety seven dollars only

five hundred ninety seven dollars left

on it is ninety six percent funded

meaning there's enough other investors

out there that think that this is a good

investment for them and so they put

money into there if I wanted to do it I

could take twenty five dollars put it

into this loan I'm expected to her in

six point four nine percent so long as

the loan doesn't go belly-up they don't

uh you know basically so long as they

stop keep paying the loans if you look

down here you see this guy with a

reading of B he wants to do a home


once it's about fifteen thousand dollars

he is rain in return who's going to be

eleven percent right now it's 81 percent

funded there's still 13 days left

meaning there's a lot of people that

have confident service but take a look

at the the the loan rating here if I

take a look at this listing ID I'm a

look at the details on here so the

interest rate is correspondingly higher

the first loan we looked at interest

rate was quote was seven percent this

was close to twelve percent we could see

the monthly payments gonna be four

hundred and eighty-eight dollars

Prosser who's gonna charge you a 1% fee

on everything that comes back to you

that is unfortunate but I don't expect

them to work for free so now I want to

take a look at the borrower's credit

profile so he's got a prosper rating of

beat right his credit score is not bad

seven hundred and seven nineteen his

Prosser scored this is their proprietary

risk score seven which is not great

which is why he's rated the beat there's

no delinquencies right now whatsoever

he said one credit inquiry in the last

six months his first line of credit

though it was in 2009 can't be that old

and he's got eight lines of credit open

12 total lines of credit and we

revolving credit balance of four

thousand seven hundred and thirty nine

dollars which means that he already has

debt out there and he's using

eighty-five percent of his available

debt and the fact is he doesn't have a

mortgage so if he only got his first

credit line in two thousand nine right

he's at four thousand seven hundred

thirty nine dollars out there that

represents eighty five percent of his

bank card credit utilization and he has

no mortgage first of all I mean huh I

don't know if he doesn't have a mortgage

and he's only had credit for a few years

maybe he paid off his house but maybe

this is not really for a home

improvement or anything like that

also the the debt to income ratio is

high it's a forty eight percent I think

their cutoff is fifty percent so it's

really at the very edge that his

occupation is skilled labor that doesn't

tell me what he does and he's been at

that job for three years or show this is

a loan that if I were picking and

choosing loans to invest in this is one

that I would probably pass in or pass on

or this prosper reading B loan would

would be something that would be a much

smaller portion of my portfolio now

it's higher risk of course but with that

higher risk of course comes more reward

you do have more in the way of interest

rate okay so if I go in that look at

something else we're looking at medical

dental costs

this person is in verification states

free meaning they've already provided

the vast majority of the documents they

need they live in Maryland the

borrower's rate is five point three one

which means that my rates gonna be four

point three one it's 69 percent funded

the credit profile looks pretty good the

occupation is a nurse that it's

excellent the debt to income ratio is

lower than we looked at before she's

been in her profession or he has been in

his profession for nine years ten months

bank card utilization was only at six

percent they have a mortgage yes meaning

that they own their own home so I'm not

sure why they need money for dental home

unless it's was purely cosmetic stuff

but the FICO ranges between a 20 and 850

this person looks pretty good for a loan

meaning this is one that I would

probably put some put some funds into it

seemed like a pretty low risk investment

low-risk investment of course means low

potential for return we're looking at

after prosper taking their fee that it's

going to be four point three one percent


typically there are more loans in this

that are available for you to bid on I'm

gonna show you my portfolio of loans now

when I go back to you my investments


and I'm going to show you my portfolio

and I'm going to show you what it is

that I do differently I do not pick and

choose lumps I set everything on

automatic meaning everything is done

automatically I set the kind of standard

that I want as far as how much I wanted

each category it pretty is very close to

what their categories are - I just have

a little bit more on some riskier stuff

and I let the Machine do it


I found that picking and choosing loans

based on how I felt the borrower was was

able to pay back the loan really didn't

work any better than the computer did so

I tried doing it my way for a while I

had some defaults in it and I wasn't

making a return that I wanted I let the

computer take care of it let their

algorithm take care of it and now I'm

making a little bit more return if you

look the yield on the loans that I have

average yield on there is much higher

than the average return on my portfolio

why is that well that is because there's

always going to be some default in here

and let's find some B's so I've got

roughly 250 loans out there some of the

loans were completely paid up meaning

this guy took out a 3-year loan but

painted off in a few months so my yield

on this was 6% but it was $25 loan I

made 12 cents out of eight six six

percent right so pretty much all these

are twenty five dollar loans are between

three and five years let me see if I

could find one here all right so this

guy is late on his loan meaning this is

a triple-a borrower

he's 16 at 90 161 and 90 days late he's

only paying you back a dollar and 52

cents sometimes this is a problem with

the payments getting rejected by the

bank sometimes it's someone who just

borrow the money and just is not gonna

pay it back because they lost their job

or something like that

okay so here's when what really drags

down your payments down other debt sold

so this right here is a guy that was

into foam for a long time he wasn't

paying back his loan and the debt was

sold now I'll end up getting a maximum

back of 40% of the outstanding amount

which is that 24 20

I'm not gonna get any more than that

back prosper takes that take 60% of that

or so as they when they have to be the

one to recover any of the velocity right

but they're the ones doing all that I'm

not doing it and this is kind of one so

if you're doing one of these these loan

accounts you kind of have to accept the

fact that some of these loans or wants

default do people just aren't going to

pay you back so when I'm looking at this

sort of twenty percent twenty three

percent thirty percent nine percent but

that's not what I'm achieving over time

these small defaults and these small

canceled loans are going to dry down

your portfolio performance over time now

if you look though there are plenty of

people that go ahead and pay these loans

off well ahead of time typically I like

to keep an eye on people like that if I

look at the prosper history like if we

look at this guy right here

the original listing info the borrower's

uh the the borrower's original credit

profile and we look at whether or not

usually there's on here like the prosper

score reading is really really high

probably because he's already paid off

awhile right

his credit looks good of course you've

got 25 line 25 lines of credit there he

still has a revolving credit balance but

he did pay us off completely

everyone who he borrowed money from in

this loan we got paid off completely I

don't know that's he could because he

consolidated his debt somewhere else I

don't know how he did but it's going to

raise his prosper credit profile now

that he's paid off alone I really like

to take the loans when I can or or fun

ones that I can when somebody has

already paid off all right

yo so I'm going to head back to my

investment portfolio

and I'm going to show you guys Auto and

best okay so the auto invest feature is


all right Otto invest basically the

feature that I used to do all of my

investing at this point I don't really

pay any attention to this account I can

tell you that between 2008 and 2009 2011

and 2018 I probably looked at my account

two or three times and no more than that

and it just kept growing and growing and

growing and the reason I didn't look at

it because I couldn't really engage in

the business of investing in that at

that point but so one of the things I

was allowed to do my companies that

worked for was to use this auto invest

feature both Lending Club

and prosper calm they both have an auto

invest feature they might name it

differently but this is the way it is

with with prosper you can choose to have

a be weighted return which is the higher

credit quality return the marketplace

makes or the high risk return right

right so this is where your yield is

somewhere is calculated somewhere around

15% because of the high rates of

defaults your historical return is gonna

be between 3.4 and 7.4 I have chosen to

have a marketplace like mix with keeping

2% of my account big capital punch why

is it 2% I don't know maybe if I need an

extra 50 bucks or something a month I

don't know but I've kept it there so if

you look mine is pretty much spot on

right now as far as where I want it to

be this is a custom mix but it is very

close to that marketplace makes all

right well I have some in in the

double-a someone ABC and as the risk

grows my my holdings of those decline

right so I pretty much only do $25 per

note because my account is pretty small

as my account grows larger and larger

and Lords are probably gonna have to

make the share of what I what I actually

contribute to a note grow just because

there will be enough notes from you to

invest in so with my current allocation

my yield is 13.2% the historical returns

are 3.4 26.9% mine is right in the

middle there like five and a half

percent and I think that's realistic

like you're gonna have enough defaults

where people don't pay you back that


your overall merger right so those are

the neat things winning you are the neat

things about how it works too

is that you can either choose to pick

and choose your investments yourself or

you can choose to have it done

automatically I choose to have it done

automatically to make this really be

passive investment where I'm making

money when I'm sleeping I'm making money

every month so I'm gonna be putting more

and more funds into these now that I can

so if you wanted to pin on an account or

bid on something

actually why don't we just do that right

now so I'm gonna browse listings I've

got some cash left in my account I'm

just gonna go ahead and make an

investment right now so I'm gonna choose

this guy right here or this this guy or

gal right here who had

yeah for the for the dental work so I'm

going to choose this one right here

it's as easy as this I'm gonna put in


me five Add to Cart

all right

and I'm gonna place the order

and it's as simple as that folks when

then one or two days the order will will

be confirmed when the loan actually

funds it'll show up in my portfolio

that's actually the first time I've made

an active placement in years and years

and years by the way but I just I just

did that for demonstrations of this

video so if I go back to browse my


now you're gonna see that I have $15 in

available cash no pending that's $25 I

still have twenty two thousand four

hundred twenty-five dollars and 18 cents

and if you can go back and you can look

at my history and you can see that

automatically this is done

pretty much every month right where

there's a completed purchase here

completed purchase there completed

purchase there every month or several of

these that are made for me now you're

being paid back on these loans every

month portion of principle and of course

no interest so you don't so you have

more coming in than just the five point

three five percent or or five or

whatever your yield is you have more

than that coming in because there's

interest and principal and as so long as

you're we investing those pencil months

every month and a little bit of interest

it's gonna grow and grow and grow and

I've been setting everything to reinvest

I'm taking any withdrawals on this

portfolio but eventually let's say I

have you know a yield of around six

percent in my portfolio is a hundred

thousand dollars or a hundred twenty

thousand dollars I can take out five

hundred dollars a month in the future

when I'm retired as a sort of a pot and

you can set that up automatically to you

automatic controls I can set them up to

take out five hundred dollars a month if

I had it's 120 thousand dollars in the

air and I'm give me six percent yield

I'm taking out five hundred dollars a

month and my income is still growing

because a portion of that interest that

I'm making is being reinvested every

month so not all my living off of the

investment income or at least a portion

of that is providing some living income

for me it's still going to grow over

time too so so from this perspective

perspective this is a pretty good

alternative investment asset class I

think I don't know if it would be

officially classified one as one as of

yet but it's not fixed income because

there is no market for these loans these

are unsecured loans by the way there's

no market for them you can't buy or sell

them it's not stocks it's not real

estate it's something that's just itself

so that's one of the reason that I like

a couple of the negative things with

peer-to-peer lending is this I cannot go

to my investments

so one of the really negative things

about this and this is a big deal for

some people it's not so much for me

because this is a small amount of money

but even when it's a larger amount of

money it won't be such a big deal these

notes down here you know how to market

for you can't sell them they are not

liquid so once you put the money in you

can't withdraw you can only a draw it

withdraw the available cash that comes

out every year so you can't put in five

thousand dollars of investments and

three months later say I want my

investments back you're not getting them

back I think there is a way to get them

back the penalty is literally it's just

I can't there's no reason even consider

there used to be a market for those for

those notes where you could sell a

non-performing note but they were

getting looked at by FINRA

to be treated as a security and that

would have caused all kinds of other

layers of complication so they decided

to get rid of that market place I do

think that getting rid of the forums

where you could talk to borrowers is a

better idea

people were including me I was making

decisions on who I would loan money to

even at $25 based on emotional things

and whether or not I liked their

personality or life the way they wrote

none of them really matters and I think

that the when I switched to auto invest

it proved it over time but I would even

though I didn't think I was making

decisions irrationally or emotionally I

probably was and I've done better under

the algorithms than I did so I'm gonna

stick well there you have it folks that

is today's video on peer-to-peer lending

I hope you got an idea how it's done and

how you invest in these these different

little loan programs they're interested

in doing you this yourself I do

encourage you to do your due diligence

this type of investing is not for

everyone so go to those websites ask for

all their documentation and read through

everything and then decide on your own

this is Jason certified financial

planner with advisor edge host of

fighting words financial where we teach

you how to fight for your own financial

future please like and subscribe