I've long wondered if its truly possible to invest my money, when I originally have no more than $25 to invest. Yeah, there are platforms and online accounts that allow you to invest with little to begin with. There may be mutual funds with relatively low startup costs, but most of those also charge you a trade commission, or a monthly fee if you are under a certain balance. Well, it's now the 21st century and technology has allowed innovating companies to create processes for the average Joe to invest with little to start with! I'm going to show you how to invest with little money to begin with, through a company called Prosper.com.
What Is Prosper.com?
Prosper.com is what is called a “peer to peer” lending platform. Thinkof it like this: John needs a $20,000 loan to make some home improvements to his newly acquired yet old and outdated home. John can go to prosper.com where hundreds of thousands of investors have little to a lot of money to help John fund his $20,000 loan. So, Prosper.com does the verification of income and credit, then gives John a grade to help communicate to the investors his approximate financial strength (or in other words, how likely he is to pay back his loan). John's loan is then posted to Prosper.com and investors can choose to pitch in their own funds to help provide John with his $20,000 loan. The loan is funded, and will be paid back in 36 payments at a 20.99% interest rate.
If I were an investor on prosper.com and I chose to invest $100 in John's loan, my $100 would be returned to me over 36 monthly payments equaling up to the full amount I originally invested, plus 20.99% per year on top of that. Not bad!
An Investment That Creates A “Snowball Effect”I'm a very mathematical thinker, and I'm always thinking of how to turn my $100 into $200, then into $400, etc. With prosper.com, you can begin with as little as $25 to start investing. In fact, that's how I started. I began to invest $25 per week, and had prosper set up automatic investments for me based on my risk tolerance. I set up my bank account to transfer $25 every Monday to my prosper account. Over time, this begins to build up and soon you have 30-40 small investments in different loans, and my share of each loan is $25. Once those loans begin their payments, I'm getting a return of my $25 plus interest each month that is deposited back into my prosper cash account and then reinvested back into another loan. What started with a small $25 investment, has now turned into hundreds and thousands of dollars invested into many notes, and is beginning to deposit monthly payments bigger and bigger each time into my cash account. Just what I've been looking for!
Can you imagine how this can build up over 5, 10, or even 30 years?! It's building up a stream of passive income in and of itself! It's what I like to refer to as a “Snowball Effect.” What started out so small, grows and grows until its big enough to provide you a monthly paycheck! When is the best time to plant a tree? 30 years ago. When is the next best time? NOW!
Auto Invest With Prosper
Not many lending or even investing platforms allow you to set up your investments on automatic. If they do, you normally have to have a minimum of $2,500. When I began investing with prosper, I was poor and didn't have hardly any discretionary income, but I was able to scrape up $25. The auto invest feature of prosper is unique in that it allows you to select from one of three different risk tolerances. For sake of explaining how this works, basically you can choose from conservative, a moderate mix, and aggressive notes to invest in. The conservative being borrowers with great credit history and financial strength, and the aggressive being borrowers with less than average credit and financial strength (don't be too scared though, the average credit score of borrowers on prosper is around 720 last time I checked. Not bad).
Based on your preferred risk tolerance, you can select the type of notes you would like to invest in, and when you have enough money in your prosper cash account, prosper will select notes that fall into that category and invest in them automatically for you! Awesome! SET IT AND FORGET IT!
So… When Do I Start Getting My Money Back?
One thing I wish they explained better when I was starting up with Prosper.com was when I start seeing my return of my investments. If I'm lending $25, and they are paying that back to me over 36 months, do I get my money back plus interest at the end of the term? Or do I start seeing monthly deposits into my account? Well, I'm happy to tell you it's the latter of the two. Within 30-45 days after the note was effective, you will begin receiving small deposits of your principle investment amount plus interest back into your prosper cash account. You can choose to take this money for yourself, or you can have it added back to the auto investments you have automated already. Keep in mind however that when you begin to invest, you agree to have your initial investment paid back to you plus interest in 36-60 months (based on the terms of the loan you invest in).
My advice, is set it and forget it for a few years. A while down the road
you'll be surprised at how much money you have coming in every couple days from different loans you've invested in, and what started out as $25 is now turned into $50, or $100, or $200, etc! AMAZING! So how do you turn your $100 into $200, then $400? By investing with prosper.com!
Are There Any Fees?
Prosper has made a strong effort to make their investing platform as simple and easy as possible. The have no up front fees, or minimum balance requirements (except for the minimum investment amount of $25). The only fee they charge is by keeping 1% if the investment return. So if your loan's interest rate is 20.99%, your net return would be 19.99%. I think I can live with that.
Overall, I'd give it a 10/10
Should you invest with prosper.com? My advice is ABSOLUTLEY! Now I'm not saying this be your only form of investments or passive income, but I think it is definitely a revolutionary way to allow the average consumer get a piece of the action! Banks used to be the only ones taking advantage of the interest rate and returns on loans they give out, not anymore! Still not convinced? Check out some lending platforms similar to prosper to compare, I'd suggest looking at lendingclub.com. Although a great company and been around a bit longer, I'm positive you'll come back here to join me and millions of others and invest with Prosper.com.
Please, leave your comments and questions below. I want to hear your thoughts and opinions. Happy investing!