Recently a friend of mine sent me a link to a website that offers person to person lending. It's a very interesting concept. Basically, it lets everyday folks step into the role of a lender. To me it seems very similar to the concept of credit unions but taken to the next level.
This is a very intriguing concept. Basically, as a lender, you fund your account with any amount of money you choose, as little as $50. Then you can browse listings from people that want to borrow money. These loans are up to $25,000.00 and can have starting rates up to 35%. You then "bid" on these loans with any amount of money you want. $50, $100, $1000, etc. If enough people bid enough money to fund the loan, then it goes through. If more than enough people bid, then the lenders that have offered the lowest interest rate on their money get to fund the loan so the borrower gets the lowest average rate of all the lowest bids.
As a lender I can spread out my money over hundreds of loans $50 at a time, there by reducing my risk even though all the loans I'm bidding on are paying 25% interest or more.
I created a criteria based portfolio that has a projected return of 16.42%! This includes estimated losses from folks not able to repay their loans.
Interested? Click the link to the right for prosper.com.
