It’s funny what the Internet makes possible. After FON. com comes Prosper.com, a service described by the New York Times as “a mixed brew of eBay, Friendster and the local bank.”
On Prosper.com, prospective borrowers register with the site and allow the company to review their credit history. Then borrowers post a loan request of up to $25,000, along with an upper limit for the amount of interest they are willing to pay. Loans are not secured by collateral and are paid off over three years at a fixed rate, with no prepayment penalty.
Lenders essentially deposit their money with Prosper — which holds it in an interest-bearing account with Wells Fargo— and either review the loan requests individually or fill out a form permitting Prosper to allocate money to borrowers who meet certain criteria.
Chief among those criteria is the borrower’s rating from the credit reporting bureau Experian, but borrowers can also join or create groups with defined interests or characteristics that, they hope, will make them more attractive to some lenders.
Among the groups on Prosper are aficionados of the Porsche 914 model, associates and employees of a Berkeley cafe and Vietnamese-American students. Borrowers, who typically post their loan requests and any group affiliation, along with a description of who they are and why they need the money, then wait a maximum of two weeks for lenders to bid in ever-lower interest increments for the right to issue the loan.