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Nora Penic: What's that ?
Betsy Stark: When Nora Penic applied for a bank loan to buy a $2, 700/choclate fountain for her fledgling catering business. . .
Nora Penic: They showed me the door, so. . .
Betsy Stark: Penic had declared bankruptcy after running up $250, 000 in medical bills for (an) open-heart surgery.
Nora Penic: They don't look at the person. They don't look at the human factor. All they look at is the numbers.
Betsy Stark: Penic's only alternative would've been to borrow money on a credit card, in her case, at a staggering 29% interest, but now she and other prospective borrowers can appeal directly to the public, all thanks to the Internet.
Betsy Stark: On Prosper. com borrowers post listings of the loans they want and why, along with their credit scores and the interest they are willing to pay. Anonymous individuals then make offers to the borrowers they like, stating how much they're willing to lend and at what rate. Prosper CEO says it's a lot like eBay, but for money.
Chris Larsen: If you leave this to people, they'll, they'll do better than institutions can.
Betsy Stark: Jane Boole is one of hundreds of lenders on Prosper. com. She's already made 140 loans worth $22, 000 at an average interest rate of 22%.
Jane Boole: I 'm also very partial to sort of the corky business stating a little help.
Betsy Stark: But Boole knows lending on Prosper is risky business.
Betsy Stark: There's no assurance you'll get repaid. . .
Jane Boole: No, none whatsoever.
Betsy Stark: Certified financial planner David Mendels calls it closer to gambling than investing.
David Mendels: If I walked up to you on the street and I say , "Here's a copy (of) my credit rating. Would you like to lend me $10,000? Chances are I'd have a hard time getting any money out of you.
Betsy Stark: Even Nora conceives it's a giant leap of faith.
Nora Penic: You're asking money from absolute strangers.
Betsy Stark: But now she has the money for her chocolate fountain at 15% interest.
Betsy Stark: Betsy Stark , ABC News, New York.
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