I have to say this site intrigues me. It is a site that the average joe borrow from the average joe. At least this is what they claim. Here is a quick summary of how it works. The business was founded by Chris Larson, the founder of E-Loan, as a place for people to come get loans from other people rather than banks. It also gives people the chance to play the bank and make loans to other people.

If you stop here I absolutely love the idea. It is essentially how a bank does it anyway. You have a checking account that they, in turn, lend out. Prosper.com simply plays the middleman by finding the borrowers and lenders and taking out a fee. They do all the background checks and establish a credit rating and a lending rate they feel the borrow qualifies for and then sells the loan in small increments. Lenders can then search the list and loan the money. Terms are laid out for each person and the reason and rate for each loan. Prosper.com handles everything just like a bank, collecting the money and paying the lenders. They send out late notices and charge late fees which are distributed to the lenders.

Sounds great doesn’t it? The problem is exactly what you think, there is a much higher rate of default. If they were good for it they would just go to a bank and pay half the rate. Looking at the rate most of the people get even get a much better rate on a credit card. This is probably a last resort for most. Proper knows this and their answer is simply this. Diversify between many different borrowers and you’ll be fine. That’s what the high interest rate is for. It is worth checking out and is a very interesting business model. Chris Larson does have a proven track record. Check it out and tell me what you think.

PS This is DEFINITELY not a pay-per-post(I will never do that) just something that caught my eye.

Here is a good independent review and summary of the site.