I've been lending through Prosper for a little while now and making decent returns (a bit over 16%, no defaults yet). For those who haven't heard of it, they effectively coordinate person-to-person unsecured loans with many lenders each taking a piece to manage the risk, and them just taking a point off the top for managing it (they do all credit checks, managing electronic payments, handle the legal issues, and even send to collections if necessary). As for this post, they have a promo going on through the end of August where if you join on a referral you get a decent bonus after the first loan on which you bid is disbursed (the person who referred you gets a bonus too). If any of you are interested in trying it out, you can do so here.
The 3 year term is longer than a bank account and even many CDs, but I guess I compare it to investing in other securities, but with returns better than equities. I figure if I invest in a few loans a month, it can be a pretty solid investment and the risk ends out rather distributed after a while.
Copyright ©2000-2008 Jeremy Mooney (jeremy-at-qux-dot-net)
I've been doing that for awhile now -- since last fall I think.. Trying to get out now, though. No defaults and 13% or so return but it does tie up your money for a long time and with the amount of money I put in there (not much) it basically is a roll of dice on whether someone defaults or not on if you get the returns. I suppose with more money in and more diversification you could guard against the defaults.