I was reading around the web this morning and stumbled on a post titled "Looking for Prosper.com Friends" (linkage below). I wasn't so curious about the looking for friends part as I was to know what Prosper.com was all about.

Are you ready for this? It's a site which puts borrowers and lenders directly in touch with each other. The site relies on people like you and me (well, not me) to put up money to be lent to borrowers. You decide how much money you want to lend out, and how much you'll lend to any particular individual. You set the rates. You take the risk of default.

Borrowers' credit ratings are based on their performance against previous loans taken out. Right there I'd heard enough to know I wouldn't be putting up any of my money.

Why not? I wouldn't want to lose a bunch of money, that's why. Think how easy it would be to game this system. If I were an unscrupulous borrower I'd be licking my chops at this game. I'd start out borrowing small amounts and I'd make sure to pay them back on time and with interest. I'd gradually start taking out larger and larger loans as I gained the trust of lenders and my credit rating improved on the site.

Then it would be time for the big score. Take out a nice, big loan and spend all that credit rating equity all at once.

Heck, I might even recruit friends and "employees" to aid in my grand wealth redistribution experiment.

If you have a real appetite for risk, you should be buying calls or selling puts. Nearly 7¾ of outstanding loans are past due. That's all loans, kids, not just the D, E and "High Risk" rated loans. In total, that's over $2.3 Million hanging out there that people are losing sleep over.

Worse yet, you don't even know the crook you handed your money to so you can't complain about him to anyone. Would you anyway?

Show of hands... Who would admit to anyone they had loaned money to someone over the Internet?

Linkage:
Looking for Prosper.com Friends
www.prosper.com (No link. Sorry but it's just not warranted)