This blog contains some simple tips and advice from two regular guys. We're not accountants, financial advisors, or brokers, so follow, ignore, or discuss our ideas as you see fit.

Friday, September 14, 2007

Start your own bank!

Posted by Matt
So far we've written articles about lots of things to do with your extra money: savings accounts, retirement accounts, education accounts, Berkshire-Hathaway stock, CDs, savings bonds and gold. Most of this is pretty conservative stuff that a financial adviser would probably endorse.

But let's say you've already got the basics covered and are looking for something a little more exciting. Maybe you'd like to use your extra cash to help people in need instead of giving it to a bank to invest. Why not start your own bank?

Ok, not literally. I doubt most of our readers have tens of millions of dollars in start up capital, but I did find a website that facilitates private lending. Check out http://www.prosper.com/. The site essentially brings together people that have money with people who need it.

I haven't actually used this site yet, but I'd love to hear from someone who has. My initial response is mixed; on one hand I think it is great that people who can't get help from regular financial institutions now have a new option. On the other hand, I'd feel guilty charging the high rates that some of the riskier borrowers are offering. Many of them are in financial trouble and have limited options and obviously the lenders have to justify the risk they are taking.

If you decide to give lending through this site a try, just remember that the potential for high returns always comes with higher risk. I'd recommend diversifying within the site by partially funding a large number of loans.

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