The internet continues to exhibit an untrammeled elimination of the middleman. A new company, Prosper.com, now allows direct person-to-person lending. I have set up standing orders (one of the best features of the site as it allows automatic bidding on the loan requests) and have created a loan portfolio with an even risk distribution. People submitting loan requests are graded with a risk rating from AA all the way down to HR (high risk) and NC (no credit rating). The risk ratings are based on the credit scores obtained from the credit agencies.

As of writing, Prosper has 90,000 members and has originated over $18 million in loans.

It appears that there is currently a far greater demand for loans than there is a supply of capital bidding on each loan. The implications for my risk-adjusted return are not yet clear, but I think it’s a great idea.