The Internet has opened up new vistas for the potential homeowner.  Person-to-person/peer-to-peer (P2P) lending has become the latest in money acquisition and investment trends.  But is it reliable, is it safe, and what are the implications of defaulting on a loan taken out in cyberspace?

One of the big movers in the P2P world, Prosper Marketplace (prosper.com), opened its virtual doors on February 5, 2006.  A little over 2 years later, they are the largest U.S. P2P lending marketplace, featuring loan requests from all over the country.  Loans are requested for a wide variety of reasons: from Mortgage consolidations to sending little Johnny to college.

Prosper began with a simple premise:  Connect people with the funds and the willingness to invest them with people who needed funds and were willing to pay interest on them.  Add to that area for people to explain why they should be the person you invest in and you have a system that is, in ideal circumstances, both lucrative and strangely intimate.

However, Prosper.com currently only allows a spending cap of 25,000.  For a lot of home buyers, this won't be enough.  So, P2P lending agencies that do support loans of the amount needed for a down payment have sprung into being... or are trying.

Home Equity Share (homeequityshare.com) is one such. The idea is that you, the buyer, want to put 20% down on the home of your choice.  The problem is that you currently have 0%.  Or 5%  Or 10%, but nowhere near the magic 20%.

Enter Home Equity Share, which happens to have a person who wishes to invest in Real Estate, but doesn't want to have to deal with the home.  They lend you the amount you need (through HES) and you both agree on how the money is going to be paid back.  You might end up buying your investor's share or splitting the profits of a sale.

That's the ideal scenario.  In reality, things might be more complicated.  P2P lending online is still being ironed out.  In Canada, companies like Community Lend (communitylend.com) are being stymied by regulation difficulties.  The problem is that we're still waiting to see what is keeping Canadians from utilizing P2P networks.

Back in America, we're still waiting to see what the ultimate risk factor.  Prosper's level of defaulters has been as high as 20%.  Home Equity Share is still in its infancy and some blogs, like thebankwatch.com have indicated that it is still very much a high-risk investment.

However, the risk seems to be all on the lender's side when it comes to actual money.  The only risk that borrowers appear to run is defaulting on the loan and the resultant hit to the credit score and the gentle attentions of collection agencies.

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