Posted by: Rob Hof on February 5, 2006
People who need money request it, and other people bid for the privilege of lending it to them. Prosper makes sure everything is safe, fair and easy.
Needless to say, that’s a challenging sort of marketplace—by the company’s own description, a sort of eBay for loans. It looks like a lot of thought and planning have gone into setting it up, though a couple of the featured loan requests might give some lenders pause: One is $3,000 for moving expenses for a “lapsed artist” (though it has 14 bids already!) and another “credit grade E” person wants $20,000 at 3% to pay off a high-interest second mortgage (no bids yet).
How’s it work? Essentially, people who want a loan of up to $25,000 put out bids at a maximum interest rate they’re willing to pay, and people who want to lend bid in increments starting at $50. Groups of borrowers can be formed that can build reputations with good payment histories. Prosper charges borrowers a fee equal to 1% of the funded loans, as well as a 0.5% annual loan servicing fee to lenders.
The company says on its site that it’s funded by Benchmark Capital (which also backed E-Loan and a U.K.-based person-to-person lending startup, Zopa), as well as eBay founder Pierre Omidyar’s and his wife Pam’s Omidyar Network, Accel Partners, and Fidelity Ventures.
Update: Get the full story here.