A Borrower or a Lender Be

How is personalizing personal finance.

A Borrower or a Lender Be

Chris Larsen wanted to use technology “to step back to a time when there was personal accountability in the credit markets.” He hoped to revive the emotional connection people felt in banking’s olden days–think It’s a Wonderful Life–while generating market-rate returns.


So in 2006, he cofounded, one of a now handful of peer-to-peer lending sites. Prosper taps into the collective decision-making wisdom of its members, taking into account not only hard numbers but also “a million other things that are part of the human experience,” says Larsen, the former CEO of E-Loan.

In practice, it’s like a cross between eBay and American Idol. Borrowers create listings that detail how much money they need, what it’s for, and the highest interest rate they’re willing to pay. Prospective lenders offer specific amounts, and compete on the rate they’re willing to accept. As more lenders bid, the ultimate rate tends to get driven down. And bid they have: As of February 1, members had lent $35 million.

George Bailey would be pleased.

The making of a deal

The Borrower

Charles Staley
Modesto, California
Needed $25,000

Staley, 43, and his wife, Laura, wanted to start a wine shop in Modesto, California. But after a bankruptcy filing, banks “looked at us like black sheep.” Their best offer, for an unsecured loan, was $14,000 at 14.99%. Turning to Prosper, Staley asked for $25,000 at 12.99% interest, but his listing proved so popular–attracting 544 bids–that the rate ultimately tumbled to 11.45%. There were 241 winning bidders, and Staley feels personally connected to each and every one. “It’s almost like having a private IPO,” he says. “They’re like co-owners in the store.”


The Lenders

Garen Corbett
Newton, Massachusetts
Lent $400

“I look for people who understand what their situation is,” Corbett says. “So many are in such denial that they’ll sketch out a budget to pay off a loan in two years when their debt is 50% of income.” Staley’s profile, though, “jumped out at me. He seems to have his arms around his situation, and I made a larger loan than usual.”

Jon Slason
Burlington, Vermont
Lent $50

Having worked with microfinance in developing nations, Slason sees Prosper as a similar tool. “A lot of people have stories about how their credit scores don’t capture their true worth, and I find that intriguing. The detail [Staley] went into describing his and his wife’s plans and experience really solidified my involvement.”

Jason Cecchettini
Sacramento, California
Lent $200

“I like to bid on loans where that person is going to improve their financial situation rather than make it worse,” Cecchettini says. “[Staley’s] credit was just flawless, and I figured even if his business were to fail, he’d probably still pay the loan back. But as an entrepreneur, it’s exciting for me to see other people start their own business.”