Known as a nation of borrowers, America at last count had a collective $2.5 trillion in consumer debt. But it could fast become a nation of lenders as Web sites that enable ordinary people to lend to each other flourish.
Welcome to the era of coffee shop money lending.
In a cafe in Washington D.C., 31-year-old Kelly Vielmo stares at a laptop screen and browses a listing of people who want to borrow money. He has logged into his account at "person-to-person" lending site Prosper.com.
"In my search engines, I have three of them. Depending on how risky I feel that day I'll go ahead and click on the 15 percent one," said Vielmo.
That means he'll only see people who are willing to pay at least 15 percent interest.
Vielmo joined Prosper.com, because he wanted to see if he could earn a return that would cover his student loans. He did. He has now loaned $24,000 of his savings to nearly 400 people.
His average interest rate? Eighteen percent.
He clicks on another listing. It's titled: "Fashion designer needs to pay veterinary bill."
"Ten thousand dollars and she's willing to pay 29 percent," Vielmo said. "In the listing itself, we can see that she starts to ramble on about where she lives, and she has a pet pig named Tilly. She is a swine leader for her local 4H group, so she is a well-rounded individual — she just needs money for the veterinary bill."
There are photos of the lender and her pet pig. But Vielmo worries this fashion designer is overstretching herself by offering 29 percent, and she could end up defaulting. So he skips to the next listings.
Prosper.com and a smaller competitor called LendingClub.com are like the auction site eBay.com, but only for money.
Prosper and LendingClub use the Internet to bring together lenders and borrowers. Prosper.com now has more than 450,000 members and it isnt yet two years old. Lending Club started five months ago and has 20,000 members.
"People get it. And that's really important – that people understand how important money and finance are to how you succeed in America," Larsen said.
Another company, LendingCircle.com, handles loans exclusively among family members and friends. It grew so fast, British financier Richard Branson bought it and a few weeks ago and renamed it Virgin Money.
Prosper.com co-founder Chris Larsen said he's "surprised" by how fast person-to-person lending is catching on.
While lenders join Prosper.com and LendingClub.com to take advantage of high interest, borrowers come to these sites because they want to pay down credit cards that charge even higher interest. People also come for small-business loans.
Ryan Oliver, 34, needed funding for his Miami sportswear startup. He said he didn't get much help from banks.
"They didn't give me the time of day," Oliver said.
But on LendingClub.com he borrowed $12,000, at 10.5 percent interest.
Yaron Brook, president of the Ayn Rand Institute, which promotes free-market capitalism, said these sites offer a solution. "It's a market solution to get both these players into the banking business, into the banking world, providing capital for some, and providing an avenue for higher returns."
On Prosper.com and LendingClub.com everyone uses anonymous screen names. But lenders can see credit scores and other personal financial information in order to judge who they provide money to.
Still, it's lender beware.
"I have had a few defaults, and one was quite surprising," Vielmo said. "It was a day spa that needed money to expand. The person who was borrowing had very good credit and actually didn't even make one payment."
He has learned to lend amounts small enough in case he as to swallow defaults. Currently, more than 90 percent of his loans are paying on time, he said, so he'll continue browsing for borrowers.