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People to People Lending

The eBay craze has gone from what you've stored in your attic for years, to money. Through the website, Prosper.com, consumers can bypass the bank and borrow and lend money with total strangers, all on-line. But is it a safe way to get out of debt or make a few bucks?

"My credit card bill is really my only outside bill," Texas A&M University student Jessica McCann said.

It may one of a few, but it's this bill that has put this college student in debt.

"It just turned into one thing and led into another and I couldn't pay off the full balance and it built up over time," McCann said.

McCann applied for a credit card for the rewards, swiping it for every purchase.

"If we can buy an iPod now and put that charge on our credit card and pay it off over time that somehow we're saving money," McCann said.

$5,000 later, she's looking for a way out.

"If I could find a reasonable and reliable provider of a loan to help me out of debt that would be an option I would look into," McCann said.

Now there is an option, besides the traditional bank loan. Thousands of people, who wouldn't qualify for a bank loan either because of their credit history, or no collateral, are turning to the World Wide Web for help.

Prosper.com is connecting people who need money with people who want to lend it.

"My first impression is that it's really easy to use," McCann said.

Borrowers post a profile, listing how much they need, up to 25-thousand-dollars. They also list a desired interest rate and a personal story. Prosper then assigns a credit score to the borrower, based on their financial history, then lenders bid on the loan.

"It sounds like something really scary like borrowing and lending over the Internet," McCann said. "But looking at it I feel like I have a little more trust in it after kind of reading how it works"

But we wanted to find out what the experts think about the site. Does Prosper sound too good too be true? We took the idea to two bankers in the Brazos Valley area, neither had heard of the website but they agreed to take a look and give us their expert opinion. Both had similar reactions.

"I would certainly be concerned," Gregg Baird with Aggieland Credit Union said. "I guess it's with each individuals comfort level with doing business on line you know putting out you know very personal information on line."

"I don't see a reason that someone would want to take a chance on this kind of program," Ivan Olson with First National Bank said. "It's got a lot of holes in it."

The bankers questioned both the motives of the borrowers and lenders. From the borrower perspective the concern was that personal information including pictures of their children, themselves, and the credit score are up for millions to see. From the lender perspective, a percentage of loans do go bad. And with no apparent collection agency, there is the possibility of not getting your full return.

"I deal with too many people who've suffered identity theft," Baird said. "Just all these different types of fraud and I tend to keep my financial information as close to hand as humanly possible."

These warnings may keep the older generation far from Prosper.com but not younger folks, who are finding themselves deeper and deeper in debt.

"It can be very frustrating because you feel like your never going to get out of the hole," McCann said.

We did try to contact Prosper.com but they did not return our phone calls.


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