Driven by the power of the Internet, this type of people to people lending allows borrowers to make their case for a loan to put their cards - or in this case, your credit score - on the table. The creditors, who may invest up to $ 50 or $ 25,000, can offer loans in the same way that a buyer can bid on an auction online. Once the auction closes, Prosper.com awards the bids with the low interest rates, consolidates the financing and administering the loan. Borrowers to repay their loans as they would with traditional lending institutions and, by default, the community knows. Lenders can diversify their investments and reduce its credit risk for small quantities of many borrowers.
In such people loans to people, form groups (or communities, as they are often called) to establish a good reputation of the group that will lead to higher interest rates and lower reliability. Registration of a solid payment history, for example, allow a community member for a loan at a lower interest rate of a person who belongs to a group.
In the case of Prosper.com, the most popular group (with about 6000 members) is two millionaires. Started by - you guessed it - two millionaires, the group has contributed more than $ 1.5 million for a wide variety of borrowers.
The concept of social online banking is a natural consequence of the need both for borrowers in the current economic climate and the popularity of social investment. Well by doing good is a strong incentive for lenders who enjoy helping those in need, while getting a return on investment. In the process, lenders and borrowers are bypassing the banking system on the road to prosperity.
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