E-Loan Founder Launches Person-to-Person Online Loan Service

By Robert Hof, BusinessWeek

A decade ago, when Chris Larsen co-founded online loan broker E-Loan, he purposely took aim at traditional mortgage lenders, many of which he thought deceived borrowers and charged too much. Now, he intends to shake up a whole new swath of the financial services business. With Prosper Marketplace, a San Francisco startup he’s launching Feb. 13, Larsen aims to carve out a new business — this time by doing a number on check-cashing “payday” lenders that charge usurious interest rates.

Essentially, Larsen hopes to create an eBay-style loan marketplace. Prosper matches people who need small loans, but can’t get them from traditional banks, with willing lenders. Says Larsen: “We let people on both sides, borrowers and lenders, participate in the credit marketplace directly.”

Indeed, the notion is not just to provide a new way for individuals to get small loans. It could also turn anyone with a little money into a banker. Potentially, lenders can earn an annualized 6%-and-up in monthly interest payments from a range of borrowers, providing an addition to stocks, bonds, real estate and the like. “People who have money can invest directly in other people and diversify their investments,” he says.

For this complete story, please visit Prosper: The eBay of Loans?