Edward J. Pluchar - The Blogsplitter

This is an idea I like.

Check out www.prosper.com, or www.lendingclub.com.

Basically, it works like this:  You sign up.  You can be either a borrower or a lender.  When you’re a borrower, you give critical information to determine your credit-worthiness.  If you qualify, you set certain terms of the loan you’d like to receive (interest rate, loan amount).  At Lending Club, all loans are set for three years.

For borrowers, then, maybe you can get a loan the bank won’t make - to consolidate debt, or to start a small business.  The rate might be a little higher than the bank (though not by too much) and it’s generally less than credit cards or some other financial instruments.

As a lender, you can browse borrowers’ vital information to determine which loans you think would make good investments.  If you like the borrower’s qualifications and you like the terms of the loan, you then decide how much you want to invest - a minimum of $25 at Lending Club.

The loans at LC are unsecured, of course, though legally binding - if a borrower defaults, the bad loan goes on his/her credit history.  So there’s risk for the lender.  On the other hand, you can make a much better return on your investment, if it does pay back, than from almost any other source.

A guy interviewed for the story by NPR said 90% of his borrowers were paying him back on time.

So, I signed up, because I heard they were offering $25 sign up bonuses.  It turned out to be true, so I “ordered” a share in a loan to a guy trying to consolidate his debt.  If the total amount of his loan is accepted by the various investors, then I should start seeing monthly payments soon.

Maybe something like $.52/mo…hehe.

Alas, I’ll report back on how the trial goes.  If anyone reading this post decides to give it a try, let me know - I can get a bonus for referring you, and also for anyone you refer.  We can arrange a split in the bonus money.  (Extra info: If someone refers you, YOU also get a bonus - $50.  So I’m not splitting my $25 with you.)

Edit/Update (3.11.09):  Borrowers do not set the interest rate on Lending Club - a formula does.

On the note I invested $25 in, my montly payment starting 4.9.09 will be $.82.  If payments are made on-time (not early), I will come out with $29.52!  If we’re still friends, maybe I’ll invite you to the party I’ll be throwing with that extra $4.52.