Published on July 15, 2007, by

Update: The article below was written in July 2007. As of late 2008 Prosper has suspended most lending activity and seems to be struggling. I would no longer recommended them for borrowing or lending.

The Original Article:
I recently read about person-to-person lending site Prosper and was immediately fascinated with the idea. We’d already experienced the similar but non-profit microloan site Kiva.org, but Prosper has a different angle. They solicit requests for loans from average folks — many of whom are overwhelmed by credit card debt — and then take bids from other regular folk willing to lend that person some money. Loan amounts are generally in the $5000 to $15,000 range and the actual funds are provided not by Prosper but by people willing to pony up as little as $50 each. The result is that people with non-stellar credit get out from under their personal debt with simple, moderately-priced loans and lenders make a nice profit over the loan’s 3-year term.

Prosper handles all the details and even sends out the debt collectors if borrowers fall behind in their payments. And best of all, you get to read the prospective borrowers’ life stories and decide based on their details and credit history whether you’d like to help them out by bidding at a specific interest rate. Your personal risk as a lender stays relatively low since the money you invest is spread across multiple borrowers in small increments. You can also increase your profits as a lender by re-loaning money to someone else as it’s paid back just like the banks do.

I’m just now getting my feet wet as a lender, but so far I’m hooked. Whether you’re looking for financial help or can afford to invest some money to help folks get back on their feet, I say give it a try.