Prosper.com - People-To-People Lending

Looking for a loan? Do you have a little bit of money to lend? In Prosper people who need money request it, and other people bid for the privilege of lending it to them. The way Prosper works is intuitive to people who have used eBay. Instead of listing and bidding on items, people list and bid on loans using Prosper’s online auction platform. People who want to lend set the minimum interest rate they are willing to earn and bid in increments of $50 to $25,000 on loan listings they select. Borrowers create loan listings for up to $25,000 and set the maximum rate they are willing to pay a lender. Then the auction begins as people who lend bid down the interest rate. Once the auction ends, Prosper takes the bids with the lowest rates and combines them into one simple loan. Prosper handles all on-going loan administration tasks including loan repayment and collections on behalf of the matched borrower and lenders. Prosper generates revenue by collecting a one-time 1% or 2% fee on funded loans from borrowers, and assessing a 0.5% or 1.0% annual loan servicing fee to lenders.

“Prosper, America's first people-to-people lending marketplace, was created to make consumer lending more financially and socially rewarding for everyone. Prosper's rigid privacy policy reflects co-founder and Chief Executive Officer Chris Larsen's longstanding history as an advocate of stringent consumer financial privacy protection laws and practices. Prosper does not sell, rent, or share members' personal information with third party marketers. Prosper members are in control of how much personal information—if any—is revealed on the website and with other members. Prosper's security and identity verification systems are state of the art, and consistent with those used by banks, brokerages and institutional creditors. Backed by Accel Partners, Benchmark Capital, Fidelity Ventures, and Omidyar Network, Prosper has raised approximately $20 million. Prosper's marketplace platform is patent pending.”

Prosper is a marketplace for credit that enables people to lend money to other people in a safe, efficient manner. Prosper reminds people of a time when they formed credit communities to help themselves and earn a fair return on their money. This person-to-person lending can result in better interest rates for people that borrow and lend.

Will people trust this people-to-people lending system or will they just stick to well-known financial institutions? Will person-to-person lending change the banking industry forever?