Mar 21, 2006 12:49 am US/Pacific
Website Lets Public Lend Money To Strangers
by Manuel Ramos
SAN FRANCISCO (CBS 5) ―
You probably already use the Internet to buy something you need, or to sell something you don't want. But you can now use it to find someone -- a stranger, even -- willing to lend you cash.
When Andy Mowery needed $10,000, he didn't want go to a bank.
"They want more documentation," Mowery said. "They want stacks of paperwork. They want records from years ago."
It turns out that there are people like John Lucena of San Francisco, willing to lend money.
"You get a better deal, and I get a better deal," said Lucena. "Everybody's happy."
A website called Prosper.com brings the two groups together.
The Bay Area company operates just like eBay.
"Instead of people buying and selling products and services, people are really buying and bidding on loans from other people," said Chris Larsen, Prosper co-founder and chief executive officer.
Borrowers use Prosper.com to post how much money they need, what interest rate they want to pay, and why they need the money.
Lenders then surf Prosper.com for potential clients. Prosper.com does credit checks and handles the money. It hires collection agencies.
But there is no guarantee lenders will get their money back.
So they are encouraged to spread it around -- $50 to one person, a couple of hundred to another.
Mowery got his money from 20 different lenders at a 7 percent interest rate.
Lenders like Lucena use money they had in a savings account where it was earning about 2 percent. This way, their money makes a lot more.
"When I heard about an opportunity to maybe get more and also lend money to people who are borrowing at a higher rate, it seemed like a good idea," Lucena said.
So far, his account at Prosper.com is growing.
"My balance is bigger than the amount I put in so far, so that's a good thing," said Lucena.
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