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Making Personal Loans For Fun And Profit

As a venture capitalist, Craig Jones is praying the initial public offering market will soon spring back and let him cash out of his illiquid investments. While he waits, Jones is putting his liquid assets to work. He's committed $1.2 million, or one-fifth of his investment portfolio, in loans to fellow Americans.

A few are starting businesses, expanding existing ones or improving their homes. Most are just indebted Joes looking to consolidate debt or roll over Visa and MasterCard balances that are charging 14% into loans charging 11%.

"It's hard to find a return these days that isn't correlated to the stock market," says Jones. "I had to get creative."

He's done so via Lending Club, a company whose website has, over its three years in operation, matched 23,000 lenders with 18,500 loans. Total balance outstanding: $179 million. Lending Club was founded by Renaud Laplanche, a French native who worked as a New York securities lawyer before launching database search firm MatchPoint. Laplanche whipped out his plastic (and paid 18% annual interest) to cover the cost of computers and furniture early on. When he later related this war story to friends, some said they would have happily lent him money on less onerous terms.


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