Person-to-person lending site Prosper.com lets you take and make loans to other average citizens. Prospective borrowers register and let Propser review their credit history. They can request from $1,000 to $25,000 in an unsecured loan and specify an upper limit of interest they’re willing to pay. Then, other users check out the borrower’s profile and decide whether to fund them. You can bid as little as $50 on other people and fund multiple borrowers, spreading out the risk. Depending on the type of loan, you can earn upwards of 9% interest on your investment. The loans are for three years and there’s no prepayment penalty.
If the borrower defaults, Prosper hires a collection company to go after them. With almost two years under its belt, the site is still going strong. People on the site specify the reason why they’re looking for a loan, like paying off a medical bill, investing in their business, or paying off other loans at a lower rate. And for lenders, the average returns are nothing to sneeze at, upwards of 10%. For borrowers, there’s a 1-2% closing fee. For lenders, there’s a 0-1% annual loan servicing fee.
Looks like a pretty good setup to us. Has anyone used Prosper.com? How did it work out for you?
Prosper [Official Site]