It appears that online person-to-person lending is growing in popularity, with Prosper, America's first people-to-people lending marketplace, revealing that it has reached the 100,000 members milestone.
The company, which launched in February 2006, has also generated more than $20 million in loans within that same time period.
Prosper’s marketplace is similar to eBay, but instead of listing and bidding on items, users list and bid on loans. Interested borrowers begin by creating a loan listing for up to $25,000 that includes the maximum interest rate they are willing to pay. Lenders can then begin bidding to fund amounts as low as $50 toward loan listings, potentially driving down the interest rate.
Once the auction has ended and the loan is funded, Prosper consolidates the bids with the lowest rates into one simple loan for the borrower. Prosper handles all ongoing loan administration tasks, including loan repayment and collections.
Lenders on Prosper can fund loans to other individuals by searching for loans that meet their specific criteria, including credit grades, debt-to-income ratios, and historical default rates. In addition, Prosper lenders can consider borrowers’ personal stories and group affiliations.
Lenders often minimize their risk by bidding on many loans across different credit grades instead of concentrating their money in one large loan to a single individual.
This milestone signals a shift in the way Americans are managing their money, proving that many of them desire a greater degree of access and control over their finances, said Chris Larsen, CEO and co-founder of Prosper. Over 100,000 individuals are now funding more than $20 million in loans in a marketplace that has historically been dominated by larger financial institutions, and we believe that these numbers will only continue to increase as more people realize the financial benefits available to them through participation in the credit marketplace.