Peer-to-peer lending (also known as person-to-person lending, peer-to-peer investing, and social lending; abbreviated frequently as P2P lending) is the practice of lending money to previously unrelated individuals or “peers” without the intermediation of traditional financial institutions (banks). It takes place on online lending platforms that are provided by peer-to-peer lending companies on their websites and is facilitated by credit checking tools of varying complexity.
So yesterday Prosper.com sends me an email saying that they’re restructuring their P2P lending platform in such a way that it’s now legal in Michigan. I’ve often thought that P2P lending seems like a good way to get around the problems you hear about on the news, of small business owners and other decent causes being unable to get loans. But now that it’s actually available to me, I’m not so sure. Obviously it’s risky - but how risky? Russian roulette level? Being a participant in Jackass-the-movie level? Or just swimming-less-than-an-hour-after-eating level of risk?
Does anyone have experience with P2P lending? Good? Bad? Ugly?