Some people like to read People magazine. Me? I like to read BusinessWeek. It took me awhile to find this publication. I wasn't really looking for it, though--I had frequent flyer miles with Continental Airlines but, alas, I wasn't flying frequently enough. After three years, they sent me a letter saying I had to have *some* sort of activity on my account or they'd close it. But, to help me out, God bless them, they included a form so I could subscribe to lots of magazines and use those miles that were sitting around doing nothing. Plus, since that would make my account 'active', they wouldn't close it for another three years.
I looked over the list and the more lusty magazines didn't seem to be offered, so instead I selected Smithsonian, BusinessWeek, Backpacker, Outside, and probably a couple of others I now forget. Anyhow, I had no idea that I'd become a BusinessWeek addict. First of all, it comes every single week! I really enjoy the other magazines. Smithsonian is amazing and I feel a certain degree of fondness for if for no other reason than introducing America to letterboxing. Who knew that such a little article could ultimately change the course of my entire life. The biggest irony of all was that I never did read that original article! =)
But it comes once a month. I get really into the magazine, finish it from cover to cover, wishing there were more. And a week later, the feeling's gone. "What? Smithsonian?" I think a month later when the next issue comes. "Did I subscribe to that?"
But BusinessWeek--oh, they hook you. Every single week. =) It's great. It has scandals! Sex! Shocking turns of events! The greatest of successes and the greatest of failures. Fascinating stuff.
The last issue I read had a small article about website that bring people who need money together with people who have money. Person-to-person loans. And it mentioned a website: Prosper.com
I'm fascinated by this idea. Cut out the middleman (i.e. banks). In theory, those lending money can get better rates than they would by giving it to a bank, and those needing money can get better rates than they could get from a bank--if they can get a loan from a bank in the first place. In a nutshell, borrowers list the loan they need, then lenders bid on the loan until the borrower can get the best rate possible. So I went to prosper.com and checked out the site in question.
I was hooked. I read late into the night. What kind of interest rates was it for someone with an AA credit rating? What about a D or E rating? Who were these people that borrowed money from other people on the web? Who were these people that lent money to other people on the web?
I never did learn much about the people lending money, but if you check out the front page of prosper.com you'll see a list of "Featured Loan Listings". When I visited, there was a woman in her early 20s wanting a $20,000 loan to start a consulting business. Another person was trying to consolidate credit card debt into a low, or rather, lower cost loan. He itemized all of his monetary expenses and listed his monthy income to show he could reliably pay off the loan.
I'm not sure there's anyone actually verifying all the information they put online, and certainly the borrowers have a good reason to make themselves look like better borrowers than they might be, but it's fascinating how much personal--very personal--information they've put online.
It was well after midnight when Amanda walked in on me. "What are you doing?"
"Uhh....." I looked ashamed. "I was surfing the web. Prosper.com"
So I explained what the site was about, then clicked on the loan for the woman who wanted $20,000 for a consulting business. Amanda gasped. "It's porn!"
"No it's not! It's just someone who needs a loan!"
"It's financial porn!"
And I knew she was right. It is financial porn. I couldn't pull myself away. I wanted to read about other hardship stories. People with medical problems and the large debts they incurred because of it. Students trying to pay for their next semester of college. I kept clicking and clicking, unable to pull myself away from the monitor.
I'm still fascinated by the idea, and I keep going back to the site to read about newly listed loans. Right now, there's a woman with an E credit rating asking for $2,550 at 24.99%. A real tear-jerker of a story with a spouse that abused her and ruined her life, but she's digging out right now. I'm not really sure I believe the story--it could be true, but she seems a little too desperate for money. I'm not convinced she'd actually pay it all back. I wish her the best of luck, but as an investment, I'd stay away from her.
The next person needs $1,500 at 18% for nursing school. She has a D credit rating with a debt/income ratio of 11%. Not stellar, but definitely could be worse. I think this might be a good investment. Nurses are in high demand, and with baby boomers getting older the demand is bound to continue increasing. I like the fact she's in her 40s. Most of those kids in their 20s seem like irresponsible idiots, while most of the people I knew in school who were in their 40s really wanted to better their lives. This loan is actually already 100% funded by 13 different people, but the bidding doesn't finish for another 6 days, 15 hours, and 27 minutes. I could still get in on the bidding, but I'd have to offer something lower than 18% (as does anyone else who choose to bid on this loan).
I'm not going to bid on this loan--I've sent no money to prosper.com to do any bidding--but I'm glad this person's loan is already fully funded. It sounds like she'll likely get a much better rate than the 18% she was asking for, and I want her to do well. This is a story, I think, that will have a happy ending. =)
Financial porn. Love it or hate it, it's here to stay.