Prosper.com is the largest peer to peer lending business, with over 1 billion members and $226 billion in loans since the site launched in 2006. The site was co-founded by Chris Larsen and is backed by the co-founder of Capital One, CompuCredit, Accel Partners, TomorrowVentures, Omidyar Network and Volition Capital.
Peer to peer lending allows individuals to request a loan, and other people to lend them money. Prosper.com connects borrowers with lenders looking to invest in social lending, and handles the paperwork between the two parties. Each loan request is fulfilled through several lenders – so if someone requests $2,000 he or she may have 10 lenders each providing $200 toward the loan. This reduces risks for lenders who can diversify by lending their money to multiple borrowers.
Who Can Use Prosper.com?
Borrowers must be US residents with a Social Security number, bank account and minimum credit score of 640 as reported on Experian. Loans may be requested between $2,000 and $25,000 and approval is based on borrowers credit score. Residents of North Dakota, Maine and Iowa are not eligible to borrow from Prosper.com.
Signing up as a borrower on Prosper.com is quick and easy. You supply information about the reason for the loan and your credit history. You are assigned a risk pool based on your credit, and lenders who are interested may “bid” to give you a portion of your loan request. If you get enough lenders willing to lend money to completely fund your loan, you can borrow the money.
You have several options for lending money and investing on Prosper.com. You have flexibility in how you diversify your money when investing with social lending on Prosper – so you can put some of your money on very low risk borrowers, who have little chance of defaulting on their loan repayments; and some of your money on higher risk borrowers (who pay higher interest rates and therefore give you a chance for a higher return on your investment).
You can choose Automated lending, where you set up requirements for borrowers and Prosper will distribute your available money based on your qualifications; Individual lending, where you search all borrowers and find candidates to lend to yourself; or through Trade Notes – where you buy and sell the notes through Prosper with your Folio Investing account.