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Internet getting things done with no middleman

What if you needed to borrow a couple thousand bucks to remodel your bathroom but didn't want to pay 26 percent interest on a credit card?

What if you had a couple thousand bucks but wanted to earn more than 2 percent on your money than you would on a passbook savings account at a bank?

Such is the idea behind Prosper.com, a Web site designed to anonymously link borrowers and lenders. It is a new trend called "peer to peer lending." (Like the old Napster but with cash!) Of course, the best idea is not to borrow money at all (see also: Dave Ramsey), but if you have to, this is one interesting concept.

Prosper was founded by Chris Larsen, the founder of E-Loan, an online mortgage broker. Once he shook up that market, he decided to shake up another.

What's in it for the borrower?

Generally you will pay a lower interest rate than on a credit card, a bank loan or a ripoff payday loan joint. You specify your own repayment terms and the interest you are willing to pay, and lenders bid on your business. And you have to release your income and your credit score. (A credit rating and a debt ratio is released to your potential borrowers.) You also can join a "group" of like-minded borrowers that may make you a more attractive risk.

What's in it for the lenders?

Here it gets a little more dicey.

If your borrower pays as promised, you can get a decent rate of return in many cases (certainly a lot better than a bank savings account or a CD). There is one main strategy that lenders use to reduce their risk: to widely diversify and invest across lots of individual loans to reduce your individual exposure.

It's a tad hard to explain, but it is explained well on the site. I am not necessarily recommending the site, but it is another sign of how the Internet is changing how things are getting things done.

When my mother passed away in 2003, I found a new Web site called "Beanies for Baghdad" to which I donated her collection of Beanie Babies. They are now in the hands of Iraqi children, thanks to American troops, which distributed her toys and tens of thousands of others. (www.beaniesforbaghdad.com) Without the Internet how could such a worldwide grassroots effort have ever existed?

Take another one, called Modest Needs. This Web site (www.modestneeds.org) matches compassionate people with people with short-term emergency needs. These things are the things you can imagine coming up in your life, the sick child, the bad water heater, the car transmission.

You explain your need and hope for the best.

It's not a handout, it's a hand up.

Again, without the Internet, where would we be?

All three are great examples of how the Web is moving the dial of our society and removing the middlemen in our culture. No need for the banker, no need for anyone between you and the soldier. You mail him or her a toy, and he or she puts it in their backpack and hands it out on their next patrol.

That's amazing stuff.


James Derk is owner of CyberDads, a computer repair firm, and tech columnist for Scripps Howard News Service. His e-mail address is jim@cyberdads.com.