Its Like Lending to a Friend, Except You'll Get Interest

The New York Times

February 13, 2006

E-Commerce Report

By BOB TEDESCHI

THE Internet has become a great place to track down friends — or friends of friends — for advice or for a date. Now you can ask them for money, too. Prosper.com, a start-up company based in San Francisco, started operations last week, offering a mixed brew of eBay, Friendster and the local bank.

Prosper's users lend money to and borrow money from other people on the site at what the company says are better interest rates than those available through traditional financial institutions and without some of the risk that comes from typical person-to-person loans.

"We looked at eBay and said, 'Why can't we do this for money?' " said Chris Larsen, Prosper's chief executive.

Mr. Larsen, who founded and led E-Loan, an online lender that was bought last year for $300 million by Popular Inc., says Prosper could save borrowers and lenders money because it was a leaner operation than traditional financial institutions. He noted that consumers make, at most, about 4 percent on their savings accounts, which banks then lend to credit card customers at 14 percent or more.

"That's just a huge spread," Mr. Larsen said. "We think if you allow people to participate directly, it's a more efficient marketplace. People can make a better return on their deposits, which then become the source of credit to others."

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