A New Way to Borrow Money

According to Barron's magazine, “...banks have become tightfisted, but creditworthy borrowers haven't gone away." It's no secret that the banking industry has tightened up on lending since the mortgage meltdown, and you hear all time about banks actually hoarding cash. It was much easier to get a loan three years ago than it is today; getting a home equity line of credit or a mortgage refinance was fairly straight forward and “do-able”. Things are different today.

We all still need access to capital at reasonable rates for:

• Business expansion - more inventory, special purchases

• Cash flow issues, like seasonal revenues or large receivables

• Consolidation of credit card debts into one payment

• Buying a vehicle, including a lower cost Tool Truck

• Various other reasons, both personal and business

People still have the high credit scores that used to open doors.

As a matter of fact, your high credit score opened the door to the Tool Business – your tool company would not have let you drive away with $50,000 or more of their product if you weren't credit-worthy. So what to do today? There are good alternatives to traditional bank lending.

A company named Prosper Marketplace came up with a novel idea.

Set up a program that allows individuals to invest in and fund loans made to individual borrowers, and Prosper oversees and facilitates the process. Prosper's mission statement is “We connect people who want to invest money with people who want to borrow money”. This is called "People to People" lending; there are no banks involved.

How does a loan through Prosper work?

The short version is this: as a borrower, you fill out an application and Prosper gives you an proprietary score based upon your credit bureau and other factors (your credit bureau is not disclosed, your privacy is paramount). You then use the Prosper score to present your loan request to the investors on Prosper, who will review your proposal amount, payment term, and interest rate; and decide whether to fund part or all of your request. When your loan request is funded to a pre-determined level, for example at 80% of request or more (you have some options here), Prosper sends you the money. Your monthly payments are then made back through Prosper to the investors, so you make one monthly payment and Prosper divvies it up.

The Wall Street Journal likes the company.

You can read what the WSJ has to say here: Story (they are ranked #36)

Loans are available up to $25,000, and you can use it for a vehicle too.

Prosper may be just the thing for those Tool Trucks $25,000 or less. Rates are very competitive too, starting in the single digits. The Prosper Marketplace website has all the current deals.

Complete info on this new loan program is available here:

Looking to invest in someone's loan? You can choose to invest on loans completed through Prosper. Check their website for more info.

Peer to Peer Lending is a novel concept! To learn more about it, just click on the banner above.