Prosper

Looking for a way to consistently make 10% or more on your money? I recently stumbled across Prosper, a site built to provide individuals with the tools to become a lender and/or borrower of funds.

The process cuts back on the high personal loan rates for the borrower. At the same time, it provides lenders with a forum to receive passive income in the form of interest payments on the loans they make.

The best part is that you can diversify your investments, if you are a lender, so that you are protected in the event someone defaults on their payments.

Also, you can choose who to lend your money to. Screen out applicants by their risk grade, or the yield you’d like to make, and read up on the borrower as well.

Brilliant!

I have already signed up and plan on testing the waters by making my first loan for about $50. If everything goes as planned I will begin diversifying my risk by lending to more people in increments of $50 per person.

This is a great way to diversify any investment portfolio, especially if you have a need for passive income.

More on this topic soon!

About Prosper:
Prosper, America’s first people-to-people lending marketplace, was created to make consumer lending more financially and socially rewarding for everyone.

The way Prosper works is intuitive to people who have used eBay. Instead of listing and bidding on items, people list and bid on loans using Prosper’s online auction platform.

People who want to lend 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.

In addition to criteria commonly used by institutional lenders, such as credit scores, people who lend can consider borrowers’ group affiliations. Groups on Prosper are critical to bringing people together for the common goal of borrowing at better rates. Groups earn reputations according to their members’ repayment records. Groups with successful repayment histories should attract more lenders offering lower rates.

Borrowers 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.

Prosper’s rigid privacy policy reflects co-founder and Chief Executive Officer Chris Larsen’s longstanding history as an advocate of stringent consumer financial privacy protection laws and practices. Prosper does not sell, rent, or share members’ personal information with third party marketers. Prosper members are in control of how much personal information—if any—is revealed on the website and with other members. Prosper’s security and identity verification systems are state of the art, and consistent with those used by banks, brokerages and institutional creditors.

Prosper generates revenue by collecting a one-time 1% fee on funded loans from borrowers, and assessing a 0.5% annual loan servicing fee to lenders. Backed by Accel Partners, Benchmark Capital, Fidelity Ventures, and Omidyar Network, Prosper has raised approximately $20 million. Prosper’s marketplace platform is patent pending. (Source: Prosper)