Crowd Powered Lending and Loans?

Crowd Powered Lending and Loans?

By Carlos C. Franco
05/17/2007

Carlsbad, Ca. -- I was perusing the local library when I came across an article that really, really caught my eye. In the first couple of pages or so of Fast Magazine dated April of 2007 (yes I read the back stock) I came across a piece written by Michael A. Prospero (ironic) about a new type of peer-to-peer website.

The site is called Prosper.com and according to the About Us, “Prosper, America's first people-to-people lending marketplace, was created to make consumer lending more financially and socially rewarding for everyone.” But what does that mean? People who want to lend money “…set the minimum interest rate they are willing to earn and bid in increments of $50 to $25,000 on loan listings they select. People who lend can easily diversify using "standing orders", which automatically make many small loans to different borrowers.” And people who want to borrow money “…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.”

After reading, I begin to think (in italics)… So how much does this cost? “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.” I get it, its some sort of scam run out of someone’s, Mother’s basement then right? “[Prosper.com is] Backed by Accel Partners, Benchmark Capital, Fidelity Ventures, and Omidyar Network. Prosper has raised approximately $20 million.”

Apparently, Capitalism isn’t dead. Apparently, there is strength in numbers. And man would I love to see the look on FICO’s face when he finds out!

For more information please visit: Prosper.com