For as long as there has been a need for loans, peer-to-peer lending has played a strong role in the formation of many societies and cultures. Most of the ancient world was built on the backs of these loans, as farmers and merchants carved out their own swathe of history. We can look back thousands of years to learn how peer-to-peer lending was formed, and how it has changed.

Many believe that the birthplace of peer-to-peer lending can be traced to the earliest civilizations in Mesopotamia. This was an incredibly rich land, nestled between the Tigris and the Euphrates rivers, and home to many innovations. Our very first records of peer-to-peer lending can be found here, thanks to the meticulous records that were kept by its inhabitants.

In this rich land, there were two primary means of making a living: farming and the merchant trade. Both were highly cyclical in nature, and part of the year was spent without a means to earn any income. Farmers were particularly subject the cyclical effects as they tried to survive in between harvests. Loans became quite common during this time and were usually secured with a portion of the farmer’s future harvest.

As these loans became more popular, abuses began cropping up. It wasn’t too long before Mesopotamian officials instituted what many believe were the first interest rate caps on loans. They decided that no more than 33 ½% interest could be charged for crop loans, and silver loans were capped at 20%.

If you fast forward to 1750 BC and beyond, the Babylonian civilization was at its height, as was peer-to-peer lending. Cities were expanding and there was great need for loans to build, as well as subsisting between harvests. It was during this time that the ruler Hammurabi addressed peer-to-peer lending in his tablets which are now known as “Hammurabi’s Code.” (more info from wikipedia)

“The purpose of the Code of Hammurabi was to use political power to create common bonds among the diverse people of the society. It greatly influenced a total dependence on the power of their one ruler, and it was a conscious effort to exalt the king as the source, the only source, of earthly powers. It unified the empire by offering the standards for moral values, class structure, gender relationships, and religion. It was the most important of all Mesopotamian contributions to civilization.” (source — World History Chronology)

Hammurabi stated that there should be specific limits on the amount of time that would be given to repay a loan and also instituted guidelines to help lenders in the event that a harvest did not come in. During this time, peer-to-peer lending continued to evolve throughout the Middle East and Greece.

From 600 BC to 100 BC, an interesting trend took place in Greece. Interest rates for peer-to-peer loans were generally in the 18% range, and continued dropping until they settled in at between 6 and 12%. This is one of the first recorded drops in interest rates during this time period.

This drop was attributed to a greater availability of better collateral and the fact that the markets were much more stable. Peer-to-peer lending would continue to evolve throughout this time to the present, with each society and culture instituting their own rules and regulations governing loans. Without peer-to-peer lending, our past and as such our future, may have looked quite different.

When you’re a student, life can get pretty expensive and unless you have a steady income coming in, it can be difficult to take care of your every day needs. Many students decide that the best way to handle looming expenses and continue their education without worrying is through a low rate personal loan. However, there are a few problems that these students may face when applying for an unsecured loan with a bank.

Many banks throughout the United States have announced that they will no longer be offering loans for student expenses. Whether its for tuition or other needs, it is becoming increasingly difficult to get a loan in this climate. The banks that are still providing this service are charging premium rates and for many students, the amount of money it takes to get a personal loan is just too much.

However, there is another way to get financing for student expenses. Instead of going with the traditional type of loan or having to wait for a federal assistance loan, p2p lending may be the right choice for you. Prosper has helped many people get the loans they need for student expenses and at incredible rates. As more lending institutions stop offering these loans, p2p lending may become the wave of the future for students.

When a student needs to get a fast online loan, they can simply create a loan request on Prosper. This service is well suited for students that may not have a lot of track record when it comes to their credit. Lenders will see the loan request and will be able to submit bids in order to complete the loan. Students set how high they are willing to go when it comes to interest rates.

The latest figures have shown that many students will have to forgo their educations unless they can secure financing for their student expenses. Instead of giving up on your future, consider getting a personal loan on Prosper for your student needs. This can make all the difference and you’ll have the freedom of selecting a loan that will fit your criteria.

If you have not been able to get a direct personal loan from your school or a lender, Prosper offers a viable alternative towards continuing your education. This is especially true if your deadline for enrollment is nearing and you have not yet been able to secure financing. Traditional lending can take months to close and this can mean that a student may have to delay starting their education.

Instead of worrying about this, a student can get a very quick decision on Prosper. In many cases, they may be able to get full financing for student expenses in a matter of a few days or weeks, instead of months. If you need to act quickly, this is a great solution.

The life of a student is incredibly hard at times and expenses can quickly mount up. Tuition costs are rising every year, books are getting more expensive and it can be difficult to find the right kind of housing on a budget. The vast majority of new students may find that their parents simply cannot afford to meet all of these expenses. Instead of giving up on your dream of an education, there is a way to pay for student expenses that exceed your budget without having to worry about traditional financing. 

Outside of federal student loans, in the past, students had to go to banks that specialized in offering student expense loans. Unfortunately, many lenders have decided to stop offering these personal loans in light of new government regulations. These regulations were put into place to crack down on fraud in the industry, but the result has been a decrease in availability for unsecured loans for student expenses.

Although there are schools that are stepping up to the plate and offering direct loans, often isn’t enough financing to go around. Federal loans are usually quite good when it comes to terms, but not all students will be able to qualify for this type of assistance. 

To help fill this gap and provide students with loans for their expenses, Prosper is one of the best p2p lending marketplaces that works with students. Instead of having to deal with a bank that may not want to offer an unsecured loan to a student, there is now the option of getting a fast online loan with very little effort.

Students can post their loan requests on Prosper and detail how much interest they are willing to pay. P2P lenders will then bid on these requests and sometimes the bidding will undercut the maximum amount of interest the student is willing to pay.

Banks take their time deciding and if you need to get that loan quickly, it can be very frustrating. For students that have not been able to secure a loan, they may only have a few weeks left before the cutoff deadline for enrollment. In this situation, when a student needs a fast personal loan, traditional lending is just not a viable option. When a student deals with Prosper, the whole process is streamlined and financing can be obtained in much less time and with a lot less effort.

The result of p2p lending for student expenses is that students now have another option when it comes to the educational future. If you cannot get a Federal loan or you just want to bypass all of the hassle a traditional personal loan, Prosper might be the right answer for your needs.

As soon as a student decides they will be going to college the expenses start to mount up. From making school visits to determine which school is right, to figuring out how to pay for tuition and books, the whole process can start to feel very confusing. In addition, without the right kind of unsecured loan, a student can end up overspending on their loans. 

While it is possible to go to a bank to get an unsecured loan for an education, the terms may not be acceptable for many students. These loans typically charge a premium amount of interest and it may be hard to get one that allows for small monthly payments. This is vital if you’re a student or if you’re just starting out and trying to pay down a loan.

In addition to going with a traditional student loan, students now have the option of getting a personal online loan from p2p lenders. This is a fairly new process that has already provided many students with financing for their student expenses. If you’re not familiar with p2p lending, here’s how the process works.

A student will post a request detailing what they need for their student expenses. The student can then decide how much interest they want to pay and what terms will work for them when it comes to the monthly payment amount. The p2p lenders will then be able to review the request and determine whether or not they want to provide funding.

In most cases, a student will receive several bids for their online loan. The lenders will bid in an attempt to get the loan, so this is a great way for students to get the best deal on a loan for their expenses.

This is much quicker than trying to secure financing through a regular bank. Also, if a student cannot qualify for a Federal loan, this means that their options are limited.

However, with a fast online loan through Prosper, students have the ability to quickly get the loan they need so that they can focus on their education. Instead of waiting for months for a bank to decide, or trying to figure out how to get a direct loan from the school, a student can immediately get bids on their loan request.

P2p lenders share the risk and the student will get partial bids. This really doesn’t affect the value of the loan, but it is a system that is put into place to help lenders on Prosper minimize their overall risks. The whole process takes very little time and the student can have their loan for expenses in the matter of a few days.

Market Commentary By Prosper Co-founder and Chief Executive Officer, Chris Larsen

In May, a record number of loans – in terms of dollars and units – were funded in the Prosper marketplace. The sudden increased supply of loan listings with an attractive risk-return tradeoff (as cited in last month’s survey) was the key driver of the record level of originations. Also notable in May and worthy of further discussion are two recently introduced marketing initiatives.

Earlier this spring, Prosper began testing a radio advertising campaign in select major metro markets, and in early May we unveiled our new Lets Bank on Each Other^™ tagline and pilot TV ad campaign in the Minneapolis metro region. No actors were used for the television campaign; rather they feature real Prosper borrowers and lenders who have benefited financially and socially through their participation in the marketplace. In June, we expanded the television campaign pilot to select San Francisco Bay Area markets and continued our radio campaign in select markets around the country.

Another new initiative is the enhancement we made to our Facebook application. After experiencing very limited success on Facebook, in mid-April we decided to lower the minimum instant transfer amount to $50 for lenders who install the Prosper Facebook application. For lenders who do not install the application, the minimum instant transfer amount must be $500 and less than 20% of their active loan value. Since the introduction of the new feature, the adoption of the application has significantly increased, growing from a mere 400 users to approximately 4,000 users. This indicates that the added benefit is serving lender demand for lower minimum instant transfer amounts. In addition to the $50 instant transfer feature, the application enables Prosper members who use Facebook to share their Prosper listings, bids, and watched listings with their family and friends on Facebook.

Definitions

Attractive Risk-Return Tradeoff: For purposes of this survey release, listings are considered to have attractive returns if, based on historical loan repayment performance of Prosper borrowers with similar characteristics, they are priced sufficiently to compensate lenders for risk. Risk includes both the risk of non-payment by the borrower and other risks associated with people-to-people lending. In general, as the credit quality of the borrower declines, the range of possible returns widens, requiring a larger risk premium to compensate the additional uncertainty. The amount of risk premium required to compensate for a given level of risk is a subjective judgment. The following formula is used by Prosper to determine if a listing is priced adequately to have an attractive risk adjusted return: Maximum Borrower Rate > Risk Free Rate¹ + 3.25% + (Expected Annual Default * 1.5) + Prosper Servicing Fee. All lenders must make their own judgments with respect to what constitutes an adequately priced listing.

¹Risk Free Rate = 2-year CD national rate on BankRate.

Since Inception: November 1, 2005 through May 31, 2008. Prosper’s by invitation only “friends and family” launch began on November 1, 2005 and Prosper launched to the general public on February 13, 2006.

2008 Year-to-Date: January 1, 2008 through May 31, 2008.

2007 Year-to-Date: January 1, 2007 through May 31, 2007.

Prosper Select Index: The Prosper Select Index return is the estimated average annual return on principal, based on actual delinquency performance to date. The Prosper Select Index includes AA - E credit grade loans for borrowers whose credit reports at the time of application indicated zero current delinquencies, three or fewer credit inquiries, and a debt-to-income ratio of 40 percent or less. The annual return period reflects loans originated in the twelve month period ending one month prior to the observation date of May 31, 2008. Prime Select includes AA and A credit grade loans (credit scores of 720+). Near Prime Select includes B, C, D credit grade loans (credit scores between 600 and 719). Sub Prime Select includes E credit grade loans (credit scores between 560 and 599).

Average Borrower Rates: Average Borrower Rates are the weighted average borrower rates on Prosper Select Index loans with loan amounts between $5,000 and $10,000. Rates shown are interest rates, not annual percentage rates.

Mix of Funded Borrowers: Prime includes all AA and A credit grade loans (credit scores of 720+). Near Prime includes all B, C, D credit grade loans (credit scores between 600 and 719). Sub Prime includes all E and HR credit grade loans (credit scores below 600).