NEW YORK (10/23/07)--The credit union model is similar to peer-to-peer lending, according to the The Wall Street Journal.

Peer-to-peer lending is facilitated through websites such as Prosper.com, which aid in making loans between strangers.

Like credit unions, the website allows people to lend to others in the "same kind of affinity or group," according to Christine Barry, research director of Aite Group.

"There's a certain degree of trust." (The Wall Street Journal Oct. 21).

Through Prosper.com, borrowers can detail their financial needs. Lenders can look through the listings and make loans to borrowers of their choice. Borrowers receive lower interest rates compared with rates charged by banks, and lenders receive a return higher than the interest rates on savings or money market accounts.

About $62.1 million have been borrowed through Prosper.

LendingClub.com is another site that caters to users of Facebook, a social networking site. The site was deployed in May and has 20,000 users, with $1 million made in loans.

Though peer-to-peer lending carries default risks, both Prosper.com and LendingClub.com assign grades to show lenders each borrower's credit-worthiness. The grades are based on a borrower's credit scores.

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