This may be old news to you, but recently I was referred to prosper.com by a friend of mine.  I started surfing around the website thinking, “Wait a second, these are real people putting up their money for other people to borrow?”  The idea sounds crazy.  What happens if they don’t pay?  You don’t have a million other loans out there like banks do to eat your losses. 

The idea sounds decent for the borrower, but not for the lender.  I could be wrong, but by looking at the site, the lowest rate you are going to get is about 7.5%.  Maybe it can get lower than that if enough people are bidding for to take your loan.  Here is another scary thing – the money is automatically put in your bank account once the bidding is over, then you make monthly payments through automatic payments that are withdrawn from your account.  I guess that is how they try to protect the lender from getting screwed over.  However, could you imagine if your credit card company or car loan company had access to your bank account?  WOW!  What if times get tough and you can barely afford to buy food and have a roof under your head? 

I don’t know a lot about this website yet, but my initial reaction to it was not a good one.  It weirded me out that individuals were putting their money on the line in hopes of making a return from someone they have never met.  I understand that there are venture capitalists and such out there, but usually they at least meet the person face to face before they invest their money into a start up business!  I saw ones on there for a loan to pay for an engagement ring.  What do you do, put a lien on the ring until he pays it off? HAHA.

Let’s get real people.  What is wrong with paying for things with cash!!!!!!!!  Why is that such a foreign concept nowadays?  Work hard, save up cash, and go pay for stuff!  I guarantee that you can get a better deal when you pay for cash too, because you actually have some bargaining power.  Money talks, yo!