is betting that you will. Launched earlier this month, with little fanfare, Prosper is hoping to connect people with money to people who need it. For a fee, of course. Could this become the eBay of loans?
A decade ago, when Chris Larsen co-founded online loan broker E-Loan, he purposely took aim at traditional mortgage lenders, many of which he thought deceived borrowers and charged too much. Now, he intends to shake up a whole new swath of the financial services business. With Prosper Marketplace, a San Francisco startup he's launching Feb. 13, Larsen aims to carve out a new business -- this time by doing a number on check-cashing "payday" lenders that charge usurious interest rates.
Essentially, Larsen hopes to create an eBay-style loan marketplace. Prosper matches people who need small loans, but can't get them from traditional banks, with willing lenders. Says Larsen: "We let people on both sides, borrowers and lenders, participate in the credit marketplace directly."
Anyone who is looking to borrow money- up to $25,000- can create a listing on Prosper, so long as you're a U.S. resident with a bank account and a Social Security number. You can borrow money for whatever purpose you wish, and you can even specify the maximum interest rate that you're willing to pay. Now, you don't have to post your real name, or any other personal information in your listing. However, you do have to submit to a credit check, the results of which are shown on your listing as a letter grade. This helps prospective lenders decide if they want to loan money to you or not. Most borrowers will have a grade from A down thru E. If you have excellent credit, you could even score a 'AA' grade. If your credit rating taken a serious beating, expect a grade of 'HR' which is assigned to 'high risk' borrowers.
Feel like lending money? Well, you can do that too. Just go to Prosper and fill out a registration form for free. Once you're registered, you can 'bid' on a loan. You don't even have to bid the full amount of the loan; just specify how much you're willing to lend and the minimum rate you want for it. Prosper will take the bids with the lowest rate and combine them into a single loan for the borrower. Like anything else, there is a risk. In this case the risk is that the borrower will default on his loan and you'll lose your money. That's why they recommend that you make multiple small loans instead of one big one. It's just like investing.
To help reduce the chance that a borrower will default on a loan, Prosper has set up groups. You don't have to join a group in order to borrow, but joining one can help your chances of securing your loan. The idea is that you will be less likely to default on your loan since it will hurt the rest of your group.
A quick browsing shows that most of the 159 listings as for debt consolidation. However, you might want to consider loaning money to vladik so he can buy a motorcycle
. Or how about putting up the funds for jerrydehoog's 'bathroo' remodel
? Hey, he even posted a picture of his grandma and a bunch of dogs.