Why not be the bank?

That’s the question that you have to ask yourself when you consider signing up for a Prosper account as a lender.   I have debated signing up for a while, and I’ve finally decided that there simply aren’t enough good reasons not to be the bank.

Times have been good for the banking industry, but it’s easy to forget with all of the recent bad news.

Looking at Citibank and Merrill Lynch (among others) many people have shaken their heads and asked “Why were they so risky? Didn’t they know what they were doing?”   The same people probably looked at the runaway profits a year ago and fumed, wondering who those big banks were cheating.  When you decide to be the bank, you can prove everyone wrong.   You can run your own investment bank or private equity firm – however you choose to think about it, you are in charge of the game.

With Prosper you have an opportunity not just to assess risk and maximize returns, but to control the whole process.

Risk management is a tricky business, but even the least risky investments like a certificate of deposit have some risk.   The riskier the investment, the higher the potential return.   Unlike holding shares in an investment bank, though, Prosper allows you to take charge and decide where and how you want your money invested.   You make the risk assessment.  You chart the course for growth.  Best of all, everyone wins – you become the bank and at the same time you help someone who needs the money.

Many people think of generating income the way they have been taught since childhood: through investing in the market, buying real estate, earning a wage, owning a small business – and never make that leap to thinking of different ways to earn money.

However, ask yourself the question – now that we have opportunities to eliminate the intermediary in banking, why wouldn’t you want to be the bank?   You can set your own goals, invest at your own rate and choose your own risks.   And once you’ve done it, maybe you can turn to those people who shook their heads at the big banks and instead of saying “well, I would have done things differently” you can say “I did do things differently.”   Maybe that’s all the reason you need to be the bank.

—

Steve S. is the author of Brip Blap, a blog about personal finance, health, career management, productivity and self-improvement. He lives and works as a contract governance and audit consultant in the New York City area, and has lived in Germany and Russia. Recently, he became an active lender at Prosper.