If you haven't heard of this before, join the club. I hadn't heard of person to person lending (other than the last time I bummed some dough off my mom) until I read an article this week in the Kitsap Sun where they talked about Prosper.com and LendingClub.com.
The premise and purpose of the two sites is to by-pass the banks and lend or borrow directly from other people. Her is a short excerpt from the About page:
People who want to lend set the minimum interest rate they are willing to earn and bid in increments of $50 to $25,000 on loan listings they select. People who lend can easily diversify using "standing orders", which automatically make many small loans to different borrowers.
Borrowers create loan listings for up to $25,000 and set the maximum rate they are willing to pay a lender. Then the auction begins as people who lend bid down the interest rate. Once the auction ends, Prosper takes the bids with the lowest rates and combines them into one simple loan. Prosper handles all on-going loan administration tasks including loan repayment and collections on behalf of the matched borrower and lenders.
I can imagine that traditional banks are probably not too keen on this idea of person to person lending. They have held the monopoly on that corner of business for a long time. But, I can also see why this modern form of lending has come about. Since this is a strictly USA endeavor, it kind of brings to mind the Kennedy quote, "Ask not what your country can do for you; ask what you can do for your country". Change that to "countrymen" and you have person to person lending.
For a complete explanation for the Prosper.com site, or to join click here. As I was writing this post, I decided to go ahead and join Prosper. so that link is a referral. I have not joined Lending Club. Since I am not a blog mogul yet, one person to person lending site enrollment is enough for now.