Prosper is a community of lenders and borrowers—or social lending
network—operates outside of any bank, so the rates are better. Post a
request for a loan, including desired amount and the maximum interest
rate you’d be willing to pay; potential lenders place bids for the
amount they are willing to lend, and at what rate. Prosper combines the
best offers and puts together a loan plan (multiple lenders, lower
risk) and manages the repayment over three years (the standard term).
The site also does credit checks, and charges transaction fees and
servicing fees.

Prosper loans are not secured by collateral, but the loan
agreements are legally binding. You can join a group to get the benefit
of that group’s positive payment history; as a member of a group, your
timely payments help improve the group’s overall rep, and that can lead
to lower rates for everybody. There are loads of rules for borrowers
and lenders—members are forbidden to arrange loans outside the Prosper
marketplace, for example—and violations can get you booted. Zopa
based in the U.K., operates along similar lines (and its site has
prettier graphics) but its network is not as big as Prosper’s, which
boasts more than 300,000 members and nearly $66 million in active
loans. Also worth noting: CircleLending which helps manage private loans between relatives and friends.

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