I made a $50 loan to some a guy I didn’t know to finance his move from Boston to New York last year. I, and dozens of other people through the online loan marketplace Prosper. I had written about a local guy who loaned more than $20k on the site, which rates borrowers based on credit score and debt to income ratios, etc.

My guy, whose name I’ve never known, was high risk because of lots of debt, but his credit score was OK. I figured I could lose my $50, but it wouldn’t send me to the poor house. Besides, Iwas curious about the web site and if he did pay me back, I’d be handsomely rewarded.

Until last month, he paid me on time and I’ve earned a 24.49 percent APY. But now my loan is one month late and the guy still owes me $23.47. Although I’ve already received payments worth $35.16 principal plus interest, so my potential loss isn’t much. I’ll also see more of a return now that he’s late. If he stops paying altogether, it’s Prosper’s policy to send my guy’s account to collections so I can get my piddly $15.

What happened to my aspiring Big Apple-ite? Did he lose his job? Take on too much debt? Saddle himself with an adjustable rate mortgage, or forget to pay his bills while on a trip? Or has he decided that paying money to a faceless swarm is not top of his financial priority list?

I haven’t thought much about this money or this guy since I signed up months ago. But now that there are signs he’s having some trouble, I wonder if a web site loaning money to strangers for unsecured debts at high rates (although nothing near a loan shark rate) does more collective harm or collective good?

This entry was posted on Wednesday, October 10th, 2007 at 3:45 pm and is filed under debt. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.