Originally published February 26 2006
San Francisco startup aims to create eBay-style loan marketplace
by Mike Adams, the Health Ranger, NaturalNews Editor
Chris Larson hopes to create a marketplace where people who need small loans, but can't get them from traditional banks, can get the money from willing lenders. Larson hopes to cut into the market of payday lenders, whom he feels take advantage of people.
A decade ago, when Chris Larsen co-founded online loan broker E-Loan, he purposely took aim at traditional mortgage lenders, many of which he thought deceived borrowers and charged too much.
With Prosper Marketplace, a San Francisco startup he's launching Feb. 13, Larsen aims to carve out a new business -- this time by doing a number on check-cashing "payday" lenders that charge usurious interest rates.
Prosper matches people who need small loans, but can't get them from traditional banks, with willing lenders.
Potentially, lenders can earn an annualized 6%-and-up in monthly interest payments from a range of borrowers, providing an addition to stocks, bonds, real estate and the like.
"At first, I was skeptical," says Asaf Buchner, a financial services analyst with JupiterResearch.
But now, he thinks the notion could have legs if it follows the same virtuous cycle as eBay, which flourished as buyers flocked to where the sellers were and vice-versa.
Here's how Prosper works: People who want a loan of up to $25,000, for whatever purpose they state, put it up for bid at a maximum interest rate they're willing to pay.
Although they can remain anonymous to everyone but Prosper and regulatory authorities, they must submit to having their credit record checked and their credit grades -- determined from their so-called FICO credit scores -- displayed on their listing.
They range from a request from a top credit-grade borrower for $5,000 at 6% interest to pay off a credit-card balance (eight bids) to a request by a "high risk" borrower for $10,000 at 13% interest to pay for a surgical operation (five bids).
"I'd rather have a little more control over what and who I'm investing in than just put money in a mutual fund."
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