Prosper.com is the on-line site that created this people-to-people lending model. it's like an eBay for money.
Chris Larsen is the CEO.
"Quite simply it just allows borrowers looking to borrow money to make loan listening like they would on e-bay and then allow any American with 50 dollars or more to bid directly on those loans," said prosper CEO Chris Larsen.
Lenders decide based on the borrower's description. Here are some examples:
Their credit rating is between AA which is excellent and HR which is high risk.
As a lender you can bid as low as $50 dollars, and the more people bid, the lower the interest rate.
"All the loans on Prosper are three-year fixed loans with no pre-payment penalties so it's a very consumer friendly loan," said Larsen.
The most one can borrow is $25,000 dollars.
Now, as lender there is no limit as to how much money you can lend someone. The return on your money is between 7.5 and 11-percent. That's more than what you would earn if you put your money in a savings account.
Over the past two years, Marilyn Paguirigan has helped 150 people and invested $32,000 dollars.
"This is sort of a way that I have used to diversify my own investment portfolio and like in any investment there is always going to be risk involved," said lender Marilyn Paguirigan.
People have defaulted but "Prosper" is confident the model works.
Stephen Dubner is one of the authors of "Freakoconomics," and follows trends in the economy.
"On line transactions of the type Prosper does can really revolutionize and has already has I would argue the way a lot of us lead our lives, the way you find a movie, the way you look for a mortgage, the way you do banking," said Freakonomics author Stephen Dubner.
Prosper says it puts the profits in the hands of people like you, instead of the giant institutions.