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Loans

Riskier Return: Prosper.com

Prosper is the eBay of peer-to-peer lending. Borrowers create listings for their loans, describing why they need the money and the maximum interest they're willing to pay. Loans range from $1,000 to $25,000 for a three-year term.

As a lender, you can put up as little as $50 and bid on loans individually or set parameters for a portfolio and invest automatically. The site charges 1% of the loan for good-credit borrowers and 1% of the annual loan balance for lenders.

The loans are unsecured, so there is risk. Double-A-rated borrowers typically pay lenders rates of about 8% and default less than 1% of the time. The lowest-rated borrowers often pay about 30% interest and have a default rate of more than 18%.

Prosper now helps lenders make informed decisions by making repayment histories of borrowers available. At the point of bidding, the site shows how well similar loans have performed.

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The borrower's endorsements are another safeguard. Getting friends to vouch for borrowers creates a real sense of peer pressure for them to repay their loans, says Chris Larsen, Prosper's chief executive officer. A borrower with one endorsement is 35% more likely to pay up.

It's not wise to be the sole bidder on any loan. Try lending in increments of $50 to $100 on loans with medium to low risk. You should earn an attractive rate of return and be somewhat protected.

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