New Way to Invest Money

I know this isn't my typical journal entry, but this is really cool and I think it could help many of my friends so I thought I would talk about it. Basically, I found this website that features Peer to Peer Lending. It is a great way to invest right now considering how low interest rates have gotten and the fragileness of the stock market. Basically, here is how it works:

1. People who need money create a listing on this website. They list how much they need and what the maximum interest rate they are willing to pay would be.
2. People who have money bid on these listings using background and credit information provided on the listing.
3. People who need money get loans and people who have money make returns on the interest rates.

Basically, if a borrow has a good credit score and lenders believe they will pay the loan back, it gets lots of bids and is rewarded with a lower interest rate. If the borrow has a less then perfect credit score the loan is higher risk and gets less bids but has the potential to pay the lender a higher interest rate.

The trick is bid on several loans and only to people you believe will pay the loans back to diversify and protect yourself against defaults. The loans are real and if the borrow defaults it is reported on their credit report. There are tutorials and more information on the site, here s a link:

The site (Prosper.com) was named one of the 50th most innovative companies and currently has $132 million in loans. Also, you don't have to invest in an entire loan. You can loan someone as little as $50 and invest in just parts of loans. I currently have invested in 34 loans and so far everyone has made their payments on time!

I wouldn't recommend this to everyone because people can and do default on loans. On their website they feature a performance section where you can see all the loans generated from the site and percentage that have defaulted and what loans have actually been paid.

If you pick loans of only people with excellent credit scores you can make between 7% and 9% easily with a very low risk investment. I personally like a little more excitement and tend to bid on higher risk loans paying closer to 30% (if they pay).

I really enjoy bidding on loans and love the fact that this site is an alternative to banks and those evil payday loan places. Check out the site and see if it is something up your ally, but don't blame me if you invest all your money in one loan and it defaults. Bid at your own risk!