I agree that nobody should dump all their money into these 2 sites, but they could be a part of any portfolio — so far, I am looking at 11.99% return, which is not bad considering what the market is doing.

Before jumping in check out the late rates for yourself on one of the many Prosper statistics sites available rather than relying on any press accounts of the default rate.

I agree, Zopa model is not as attractive.

In early December, LendingClub.com opened their (formerly FaceBook users only) lending application to the wider public. They do things a bit differently than Prosper, as they underwrite the loans (ie, bucket by credit grade and set interest rates for each bucket). They have a 640 FICO minimum for borrowers, as well as a max. 30% DTI, so maybe a better pool of borrowers.. plus they have a $25 minimum bid, which means you can diversify into twice the number of loans as with Prosper’s $50 minimum.

Zopa.com launched in the US in early Dec, but it’s nothing like their original UK version and is oddly “un-P2P”. Lenders just buy into a 5.1% guaranteed CD, and, from what I can tell, Zopa pockets the rate-spread between 5.1% and whatever they charge borrowers (up to 17% or so). Other weird stuff about their model, as well, including a mandatory “help” (ie, a forced donation of part of your return to at least one borrower). May be viable for borrowers, but as a (young-ish) lender who has no interest in “testing out” an unproven asset class for MMKT returns, not too interested.

Loanio.com is scheduled to launch in Jan ’08, and, while little is known, think it may tend toward a more free market / auction-style P2P marketplace… similar to Prosper.

It’s fun to watch the space, anyway. In 5-10 years, this stuff could be huge (and reliable, too).

Certainly, there’s opportunity for bottom feeders to take advantage of the system. However, you can always choose to lend to someone with good profile and no prior delinquencies.

Anyway, I have concerns about Prosper as well and I don’t recommend that anyone jump in without familiarizing themselves with the nuances first. I am currently investing only $50, so that I can learn. Experimenting is a good thing.

@Mike – thanks

First off, and not to sound mean, but in the same spirit as I’m not on board with the mortgage bailout for people that got in over their heads, I don’t think the world needs to empower people for not paying their bills…

Second, if I’m looking to steal identities this is a perfect place to get money and have no intention of ever paying it back –

And thirdly – granted, I think everyone deserves a 2nd chance, but most of these people that can’t get a standard bank loan are getting 5th, 6th, and 7th chances at money. I know the creator of the site is just filling a niche, but at the same time, we’re enabling people that may need to learn a hard lesson about responsibility…

Off my devils advocate soapbox… thoughts?

@Mrs. Micah – You’re welcome. Regarding the collection agencies, they work for me since I am the lender, but I hope I don’t have to use them either.

@Raymond – The important thing is that you tried. That’s what I am doing here. I want to see how I can leverage it and enhance my income streams.

@Harris – No, Prosper is a peer-to-peer lending network. Basically, people ask for loans and other people lend them money. No bank is involved, except Prosper as the middleman.

@SGM – $50 is not a bad price for a lesson. Anyway, there’s a lot you can read on Prosper. I am just an action learner. So once I had enough with reading, I want to try.