I really, can’t, for the life of me remember how I found Prosper. But I did. It is a very interesting idea that I liked immediately after I poked around the website for a little bit. Here is how it works.

Prosper connects people who are looking for money with people who have money. If you have money, you are usually looking for a way to get a good return on said money. I mean, you worked hard for that cash and now it is time that it works for you. How about returns of 8-12%? Does that sound like something Daddy would like? Indeed it does. Here is the Prosper creative for people who have money:

Now how does Prosper allow you to get a return like that? How risky is it? What is Prosper smoking? Well what are you smoking?

Now for some answers- Prosper is what you call a peer-to-peer lending establishment. Or at least that is what I am going to call it. The buzzwords are peer to peer lending. Prosper connects investors looking to get a good return on their money with people with varying credit scores who need money.

The key is that Prosper allows an investor to invest micro loans ($50-150) across all of Prosper’s members who are looking to get funded. It is called diversification, and usually is only something that people do with large amounts of money get to do. Prosper has enough people looking for loans for it to work though so it is great.

The investor can look at the person’s loan information ala facebook style to see their picture, their recommendations from other members and their loan history. They can also look at a stripped down credit score of the person looking for a loan, giving them a rating from AA down to E depending on a number of factors. Prosper really does pull credit.

And you guessed it, people with lower credit ratings have to pay higher interest rates, but if you as an investor are willing to gamble, you could get those higher rates in exchange for the risk. It is like a bond market for the masses! Prosper even has automated tools you can use to automate funding small loans with “standing orders”-see Prosper Portfolio Plans.

Prosper has some great historical information on their website and about $98 Million has already gone through the website already. Look at Prosper’s historical charts on their performance page. It is like MySpace meets Chase-Manhattan. Its absolutely brilliant! Now on the other side of the coin, look at Prosper’s creative for people who need a good peer-to-peer loan:

It looks deceptively like an ad for some skeezy credit card refinance sort of sham, no? I thought so! Shame on Prosper! Happy people smiling with APR rates is never a good way to go. Sigh. But you never can have it all. And for most people the rates you are getting are much better than credit card debt. And you can get loans that might not even be possible.

So how does it look as a borrower? You simply put in your personal information, much like getting a regular loan and then create your loan profile where you can describe your financial situation, why you want the loan, what you are going to use it for and why you are able to pay it back. You can put up pictures and really lay on the sort of story that will get a loan funded- family problems, divorce, children with sicknesses, you name it. Then people can bid on your loan and take part in the interest rate that you are offering. Once enough people have placed their little micro-bids on your loan (usually around $50-150) and it is fully funded- bam. The money is wired to your account minus an origination fee (I think its $45) and you are ready to go.

The small business loan possibilities for Prosper are endless. Housing remodels, new business loans, existing business loans and even non-existent business loans. At the end of the day your loan will or will not get funded based on your credit score with the pictures and stories only helping to establish your character. I already put a profile on here to fund a small loan and I will certainly look for Prosper in the future when trying to get some financing for my online business endeavors. I will also look at it as a sound place to get over 10% on small amounts of money as I build wealth.

Anyways- check out Prosper. I double dog dare you too.