By Nate Jones

Staff Writer 

Like any aspiring 25-year-old with a little money in their pocket and big dreams for the future, Jennifer Rose walked into a bank and asked for a loan. She had managed to save $30,000 working at Home Depot in South Portland and selling credit cards, but was still $22,500 short of a 20 percent down payment on a $225,000 commercial loan that would enable her to purchase a five-unit apartment building in the Biddeford-Saco area. 

“[The building] is absolutely perfect,” Rose said. “There’s a boiler room that’s really hot and has huge windows. What better place for an indoor greenhouse?”

Having grown up on her grandfather’s 32-acre farm in Cape Elizabeth, Rose said she has always enjoyed the outdoors and gardening – two things hard to find in her second-story apartment in downtown Portland. It was only natural for Rose to convert the back of her pickup truck to a rolling greenery; constructing a frame to hang potted vegetables from and placing large containers seeded with tomatoes, peas, squash, cucumbers, peppermint and rosemary plants in the bed of her pickup truck.

The most thriving vegetable on wheels so far: jalapeño peppers.

“How many people can say they’ve grown peppers in the back of a truck?” she asked.

The portable plants were to earn her more than bragging rights. Using cardboard, spray-paint and her online prowess, Rose created one of the most viewed listings on Prosper.com – a people-to-people lending Web site – and her “help me buy a real yard” sign inspired more than 500 people to loan her a total of $22,500 so she could finally make her dream come true.

“In theory I could go to another bank and get another loan,” Rose said. “This way it’s not like I’m borrowing from a bank, it’s people helping people.”

Prosper.com and other people-to-people lending Web sites work much like an online auction Web site. Borrowers post an advertisement for their cause, how much money they need and how much they are willing to pay in interest. Instead of bids increasing the sale price of an item, lenders donate money to the cause – a $50 minimum – and “bid” against other interest rates, bringing the overall rate down until it “bottoms out” at a rate Prosper.com predetermines based on the borrower’s credit and financial history, Prosper.com spokesperson Tiffany Fox said.

Since the site’s launch in February 2006, nearly $170 million has been issued to Prosper.com borrowers – not all of whom are looking to consolidate credit card debt, Fox said. 

“We’re seeing a lot more people with excellent credit [42 percent of registered members this year] as lenders in the marketplace are being more conservative,” she said.

Kennebunk Savings Bank Chief Financial Officer Brad Paige said modern consumers want to feel like they are in control of their finances, “rather than being handed a menu of options.”

“People-to-people lending really gives the consumer the ultimate control over their finances,” Paige said. “It’s a trend that’s been consistent with what we’re trying to do: several of our newer branches are staffed and designed a little differently, basically we want to say ‘It’s your money, you tell us what to do with it and we’ll get you there.’”

While Paige said consumers fearing an upcoming “credit crunch” may think turning to other financing sources – such as people-to-people lending – make perfect sense as more traditional lenders “tighten up” in response to the recent bout of foreclosures, it’s important to remember the experience is “more like going to a marketplace” than working with a financial institution. 

“We spend a lot of time working with people who are have trouble paying their bills, when a Web site like Prosper.com is more likely to send someone who’s overdue straight to a collection agency,” he said. “All the things I think are good about a community bank are not available there.”

Fox said the Web site does request credit scores and financial information from both borrowers and lenders but ultimately leaves the risk up to the lenders and WebBank, a Utah-chartered Industrial Bank, behind every Prosper.com transaction. 

“WebBank actually funds the loans,” Fox said. “Prosper Marketplace handles administration of the loans, makes sure that the payments are debited [from borrowers] and lenders have enough money in their accounts. Ultimately if someone ends up not paying the loan, the lender could lose their capital. We encourage them to diversify.”

Maine’s Bureau of Consumer Credit Protection Superintendent William Lund said Prosper Marketplace – the corporate entity behind Prosper.com – has had a supervised lender license with the state since 2006, but that doesn’t diminish the amount of risk associated with person-to-person lending. 

“Most loans are very serious transactions; lenders need to be licensed and loan brokers need to be registered,” Lund said. “Is there a security associated with the [Prosper.com] loans? My concerns would be as much for the investors as for the borrower.”

After spending two days in Portland’s Deering Oaks Park with her Prosper.com labeled truck, Rose decided to back out of her Prosper.com deal. The final interest rate had been “bid down” to 25.1 percent – dropping nearly 10 points in seven days – and more than 550 people had contributed money to give her the total sum she needed for the down payment, but she said she had taken up on an offer from a friend who wanted to loan her the money instead.

“Now I head to the bank,” she said. “I’m pretty psyched.”

Rose said she planned to make an offer on the Biddeford building earlier this week.