Peer-to-peer lending on the rise

"Twebster302" needed $1,200 for a root canal. "JulesWWC" wanted $13,000 to open a fair-trade chocolate shop. "Needhelp," who said he's a state employee, asked for $1,000 to get his finances in order and help his handicapped brother.

These and other cash-strapped borrowers are part of the financial world's version of They're posting personal financial profiles in hopes of connecting online with investors seeking sweeter returns.

Known as peer-to-peer lending &mash; or P2P for short — it's a 4-year-old industry that's flourishing amid the current credit crisis.

"It's a complete 180 in terms of how people look at their debt, but there's no better time for something like this," said Curtis Arnold, author of a book on the burgeoning industry.

The number of Web sites – and participants – has grown in recent months, fueled by struggling borrowers and tight-fisted bankers., a Sunnyvale-based site that hosts only prime borrowers with credit scores above 650, more than doubled its membership, from 82,000 in January to 140,000 in May.

And at least two P2P sites are in the midst of issuing stock, including New York-based, which filed a $50 million initial public offering June 22 with the Securities and Exchange Commission.

For borrowers, P2P lending is a way to get past hesitant bankers or to avoid high-cost loans. For lenders, it's a chance to earn more than a lowly 2 percent on a CD or risk the stock market.

In either case, it's a way to formalize a loan between friends – or even perfect strangers.

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