I JOINED PROSPER.COM SEVERAL MONTHS AGO. I first read about it in Fast Company Magazine. After I read the article, I went to the website and poked around. I was very intrigued. It is a "peer-to-peer" lending website. One magazine described it as "banking meets e-bay". You can join as a "lender" or "borrower". Or both. If you are a lender, you bid on loans that are "listed" by borrowers. You can bid in any amount with the minimum being $50.00.

Ok, here is an example: Someone wants $13,000.00 to pay off high-rate credit cards. The lenders get to review the loan, check the credit report stats (you don't get to see the actual report, just a summary), income, debt, etc... The site calculates the DTI  (debt-to-income) and red flags the higher DTIs. The lenders can review the "listing", which is the borrower's reason for wanting the loan, justification for the loan, etc... The lenders can then ask questions of the borrower. After reviewing the loan, you can then bid. If the credit score is too low, you will be given a warning that you have to acknowledge before you bid.

The borrowers offer an interest rate. Let's say 19.99%. (All loans are 3 year loans which makes a 20% interest rate for 3 years very attractive to someone paying 20% on a 99 year payment plan.) The lenders can bid $50 and any interest rate up to 19.99%. Once the loan is fully funded, it can be "bid down". Example, on the above laon, I bid $50 at 15%. My bid will automatically start at 19.99%. If it gets "bid down", my bid will automatically bid down until the rate goes below 15%. At that point, I have been "outbid" and I get an e-mail letting me know.

Anyway, I bounced the idea off a few friends and got pretty much the same response: "Sounds risky". Of course it sounds risky. But, as a wise man once told me, "knowledge reduces risk". I knew that I had some of the knowledge. I look at credit reports, income, employment history, rental history, etc... all day long and make decisions on whether to rent homes to people. I could just apply that knowledge to this website and reduce the risk.

I thought about it for awhile, and then joined as a lender. I have 10 loans made for a total of $550.00. I have been at it for about 3 months, all of my borrowers are current (actually none have even paid late, yet), my average interest rate is 18.24%, and I have a net return of just over $18.00 on $500 invested. Not bad. (I have $550 in loans because as soon as I had received $50 in payments, which were principal and interest, I lent it back out.)

Sound interesting? I thought so, too. There is a small time investment required. You need to research the site a bit, learn about groups, learn about the risk scoring model, etc...Feel free to e-mail me questions, or better yet, ask them in the comments so everyone can benefit.

Also, my story is one with no tears shed (yet). If you have shed a tear over a prosper deal gone bad, share it here. I have nothing but good things to say. In my opinion, based on my personal experience with the site, you can earn great interest rates fairly easily, and it's a lot of fun!

I am placing two buttons below. One is to borrow and one is to lend. Please use these buttons to join. (Yes, there are referral bonuses.)