KAI RYSSDAL: Take a quick look at that credit card in your wallet. Or the statement from your home equity line of credit. On the face of it, there're icons of how much you owe.
But there are also money-making opportunities for the companies that sent them to you. Banks, credit card companies and those payday loan centers make billions of dollars every year lending us money. But why should they get all the profit?
Marketplace's Amy Scott checked out a new way to borrow and lend.
AMY SCOTT: Let's say I could really use some money. But my credit isn't so hot and I've got some unpaid bills. I could try to get a bank loan. Not likely. I could go to one of those payday loan centers, and pay a few hundred percent interest. Or, I could go to Prosper.com.
Prosper is one of a few so-called peer-to-peer lending sites. It matches people who need money with those who have it.
Take Torrey Shannon. She wanted to pay off some debt and expand her lingerie business. So she posted a profile on the website. She described her loan request and how she planned to pay it back.
The profile also listed her credit grade — high risk — and explained why. Her husband had been seriously wounded in Iraq, and she had a bankruptcy in her past. But she was willing to pay 22 percent interest.
Lenders then had a chance to bid on Shannon's loan in increments as small as $50. Eventually, more than 30 people lent her a total of $6,000.
TORREY SHANNON: For me to go into a bank, they would probably give me 15 minutes of their time, determine that I'm not a good risk, and say "Sorry, can't help you." Whereas on Prosper, it would be a situation, well, "Tell me a little bit more about it. What exactly happened? OK, how are you going to prevent that from happening again?"
It seems fitting that Prosper's headquarters in San Francisco are down the street from Charles Schwab, the company famous for democratizing investing.
Prosper founder Chris Larson says he wanted to do for the consumer debt market what eBay had done for commerce.
CHRIS LARSON: It's really kind of giving the power of underwriting, the power of
where does capital get allocated directly to individuals.
Individuals like Perry Heinrich. He's a software engineer from Baltimore. Heinrich has lent $600 on Prosper to a dozen different borrowers. The site recommends making small loans to several people to spread the risk around.
Heinrich admits he was first attracted by the handsome interest rates. But what's really got him hooked is helping people down on their luck.
PERRY HEINRICH: If you put your money in a CD or a money market fund, you can earn 5 percent at a bank. And if your neighbor down the street is paying 15 or 20 or 30 percent on their credit cards, this provides an interesting avenue where borrowers and lenders can help one another out. And bypass the whole banking system.
It does take a lot of faith though. Heinrich says out of his 12 borrowers, three are behind on their payments. Prosper provides a collection service if things get out of hand.
The company celebrates its first anniversary next week. So far, its members have loaned a total of almost $35 million. About 3 percent of those loans are at least three months late. Even the most compelling cases can't always live up to their promises.
That's why lender Karl Waldman says he doesn't even read borrowers' stories. He has the system bid automatically on loans that match a certain profile.
KARL WALDMAN: Cause there's no way to verify what they put on the web page. It's not even worth the time to read it.
Back in her dining room / office, Torrey Shannon shows off the fruits of her Prosper loan.
SHANNON: This is a cupless corset. There's no coverage in certain areas.
The corset is one of the products she sells on her website. So far, Shannon is living up to her promise. Her first monthly payment was due at the end of last month. She's already paid through April.
I'm Amy Scott for Marketplace.