Prosper is America’s first online Peer-to-Peer (P2P) lending and borrowing marketplace. People who need to borrow money sign up at Prosper.com and create loan listings. People who want to lend money sign up at Prosper.com and bid on those loan listings. Prosper works a lot like eBay, except that at Prosper, you’re not trading collectibles or other goods - you’re trading real money. No bank or broker required. Just post a listing or place a bid!

How Prosper Loans Work for Borrowers

Borrowers sign up and provide their personal details to Prosper. They must pass an identity verification screening as well as a credit check (through Experian). They are then assigned a credit grade by Prosper, which will range from AA (for great credit) to HR (for “High Risk” credit). At that point, they are allowed to begin creating a listing for the loan that they will request.

Borrowers can choose to request an unsecured personal loan of any amount from $1k to $25k (though there are a few states that have different limits). Borrowers can select the maximum interest rate that they’re willing to accept for the funds that they need to borrow. This rate is a starting rate for the auction, and doesn’t necessarily represent the final rate of the loan. (In fact, it’s often best to start high, attract more lender attention, and let the auction frenzy begin.) Once the borrower has completed their listing and posted it to the marketplace, lenders are then able to bid on the loans and the more lenders who compete to place bids and lend the borrower money, the lower the borrower’s interest rate will fall.

Click here to see our in-depth Borrower’s Guide to Prosper Loans.

How Prosper Lending Works for Lenders

Lenders browse the loan listings looking for borrowers to fund. When they browse, they will see a mixture of numerical data from each borrower’s Experian(tm) credit report, including such items as: credit grade (AA-HR), the length of the borrower’s credit history, the number of current delinquencies the borrower may have, the current utilization of revolving credit (as a percentage), the total current revolving debt burden (as a dollar figure), the borrower’s debt-to-income ratio, the borrower’s homeownership status, and a number of other credit details.

Lenders read the narratives and go over the credit details, and then have the option of funding (or partially funding) the loan. And here’s the beauty part: The way that lenders fund a loan is by placing bids (in amounts as small as $50 per loan or as large as $25k, the maximum individual loan size) on each loan. Lenders can specify not only an amount to bid, but also a particular interest rate at which to bid, and Prosper’s proxy-bidding system will handle the rest - thus the intuitive familiarity for anyone who has ever used eBay’s auction process. Prosper additionally provides automated bidding methods (such as “Portfolio Plans” & “Standing Orders”) for lenders who wish to deploy funds more rapidly or do not have time to browse large numbers of listings and instead choose to bid “by the numbers” based upon credit details.

Click here to see our in-depth Lender’s guide to Prosper Lending.

The information contained in this chart comes from the websites of the Peer-to-Peer Lending providers listed and is current as of 12/23/07. Rates & fees are variable, in some instances, and are not APR calculations. Please consult your Peer-to-Peer Loan provider for details.

Click here to see the review guide to Peer-to-Peer Lending & Loans.