Now is your time to make your dream come true. No, you don’t have to have an Ivy League degree, or a degree of any sort at all actually. You don’t have to have a snazzy business suit or impress your colleagues with a gold-plated money clip. Instead, people across America are sitting down at their computer at home and lending out money to their fellow Americans every day.
It’s a website called Prosper.com. It is based on the theory that if you are saving money in a bank account at a 4% interest rate, and your neighbor is borrowing money from the bank at a 17% interest rate, you could instead lend your money to your neighbor at a 13% interest rate, and you would both come out winners.
The business was started by the man who started eBay (apparently he got bored and needed a new business to keep him busy,) and is based on the same concept: Bidding wars are good. But in this case, you are bidding interest rates down instead of bidding prices up.
In a nutshell, potential borrowers go to Prosper.com and place listings stating how much money they want, what interest rate they are willing to pay, and what they want to use the money for. They can put their picture up so you can see their smiling face, and you can also look at their credit score (AA down to E) along with their DTI (debt to income) rating. You can e-mail them and ask them questions if you have any, but in the end you have to make the same decision that every banker has to make: Is this person credit worthy? Will s/he pay me back? If you decide that the borrower is indeed credit worthy, then you bid whatever you want on the loan, the lowest amount allowable being $50. You also bid whatever interest rate you are willing to lend this money out at. You cannot bid a higher interest rate than the borrower stated they would be willing to pay, but you can bid a lower one. If a loan is particularly good and you want to bid on it even though it has already been funded (all of the money asked for has been bidded on) then you can still bid, you just have to bid at a lower interest rate. An occasional loan will get some heavy bidding on it, driving the interest rate down, but for the most part, Prosper.com is operating on a lenders market–there are a lot more people out there looking to borrow than there are people looking to lend, so most bids don’t get the interest rate bidded down.
Will you get rich enough to someday retire from your day job from the income? Not likely. In order to make a lot of money you would have to have a lot of money to lend out in the first place, but I know several people who make a fairly steady, if small, monthly income from this. It has the potential to be a profitable side business for you, if you have the time to investigate the listings as needed.
So the next time you have $50 and you want to help your fellow neighbors out, go and check out some listings on Prosper.com. All loans are set at a 3-year payoff schedule, so this can’t be money you need to have back any time soon, but it is amazingly addictive to bid on the listings. And you don’t even need to own a power suit to do it.