I found out about prosper a few weeks ago and did a self imposed tour of the website. I have to say this is a really good idea that I’m surprised haven’t been done a million times already. Prosper is what I would consider a social loan website. Visitors can borrow money, and other visitors are the ones lending the money. Sounds like someone is gonna get ripped off huh? I don’t know but it looks like it has a good model so that the site can sufficiently act as a loan broker.

Prosper.com

Lets say you need some money, You visit Prosper.com and sign up. You create a profile with a picture if you like and you put in all of your income/credit information. Prosper will then pull your credit report and assign you a letter grade. You can then post an ad for a loan. In that add, it will show your letter grade, the loan amount, why you need the loan, and general information about your income. Enough so lenders can determine if they want to loan you some money. It also assign a recommended interest rate for your loan based on the info you filled out when you signed up for your account.

Lenders can then look through the list of people needing loans and decide to help them. The cool thing is that you don’t have to lend the whole amount the borrower is asking. What you actually do is “bid”. You pick an amount and an interest rate and place your bid. the borrower will then accept your bid and you send the money to Prosper. You can bid the whole amount, or partial amounts. The loan will stay open until enough people has made bids to cover the loan.

After the bidding is complete, the borrower will get the money transferred to him/her and will be put on the prearranged payment plan. As monthly payments are being made, the money is then split between all of the lenders and added to their Prosper account. Those payments will be made to you until the amount you loaned and the interest rate has been paid up.

Sounds like a good idea if you are looking for that sort of thing, but I would say read the site carefully before you go lending or borrowing money. I didn’t see anything alarming and everything looked straight forward but its up to you to be comfortable with any website like this.