You're not really loaning money to anyone, at least, not directly.
What you are doing is loaning money to Prosper, along with other users. The money is pooled and then used to fund a loan that Prosper originates for a borrower member. Then, Prosper gets its fee.
Prosper's only incentive to ensure that the loans are good is that if a large number of loans go default, their reputation suffers.
They are like a bank, except without FDIC deposit insurance or significant regulation and scrutiny from the government.
Any other financial institution folks, feel free to correct me.
Well, I’m not stock market savvy, that’s why I leave my stuff pretty alone. :)
I will say this, though; I have invested $2500.00 in 5 groups at $500.00 each. The groups I’m in focus mostly on “second chancers”. There have been some losses, but in almost 2 full years, I’m $831.00 to the plus side.
The money is nice, but more importantly to me, is that it’s helping people help themselves. I like that. :O)