As business models go Prosper is definitely one of the interesting combinations of risk management, money making, contribution, auctioning and social networking. You can sign up with them if you need a loan or if you have some money to lend. What is really fascinating how Prosper built in social networks to increase the trust levels of borrowers (lending to people in your local community, people from the same college, same background, same predicament).
As a borrower you publish your profile and your elevator pitch on why you can be trusted and why your project is worth funding and why you are good for the debt. You can compel emotional support for caring for a loved one or spread the risk of building your next business.
If you have good credit the going rate is around 8% if your credit is really bad you should expect to pay above 26%. The rates seem to be in line with market rates for good borrowers and certainly beat credit card borrowing costs for many.
As a lender you get to spread your risk by syndicating loans with other lenders. You can pursue a pure capitalist agenda of maximizing profit (lending to a high risk venture @19% interest) or more of a social agenda and lending to the idealist building a daycare at 4%. You get to realize 8% and better with good borrowers at reasonable risk. Remember, you can spread your risk with many lenders and across multiple loans.
As any good market, borrowers can bid up interest rates they are willing to pay to attract lenders and lenders can bid rates down to get the borrower with the lowest risk.
Either way observing Prosper you can learn a lot in this petri dish of capital allocation on what people are compelled to invest in, take risks for and why. Market driven interest rates get set for various endeavors raging from social (paying for the wedding) to business turnarounds.
The rich data collected by Prosper would be fascinating research on how social networks get built around money.
As the business model goes, Prosper charges 1% one time closing fee to the Borrower and 0.5% annual servicing fee to the Lender. Lenders also get collection agency services at extra charge. All around a reasonable value proposition.
Technorati Tags: business models, Prosper, social networking, success, value creation, wealth