A priest near Orlando, Fla., borrows $9,000 for home repairs at an annual rate of 17.75%. A second-year Harvard Business School student wants $15,000 for foreign travel and gets a loan at 8%. A stepmother in suburban Sacramento needs $4,000 to cover the legal expenses of adopting her stepson and gets a loan at 23.75%.

These three borrowers have one thing in common. They’re part of a loan portfolio that I’ve built, sitting at my computer in New York, with the help of Prosper.com, a new San Francisco-based Web site that facilitates peer-to-peer microlending — that is, individuals lending money to one another directly.

For those needing a small loan, Prosper represents an alternative to credit cards or the credit union. And for those with a few dollars to spare, it can be a more entertaining option than savings accounts and bonds. Though there are a few other sites that provide similar services — and at least one, Zopa.com, that plans to launch in the U.S. later this year — Prosper, for now, is the most popular.

Prosper operates like both an auction site and an online dating service. It provides an eBay-like forum where lenders can evaluate hundreds of prospective borrowers, each seeking loans of $1,000 to $25,000, repayable over three years. The borrowers explain why they want the loan, Prosper provides information on homeownership, credit history and debt-to-income ratio, and the loan gets put up for bid at the maximum interest rate the borrower is willing to pay.

The loan requests read a lot like personal ads, complete with head shots of the borrowers, or cute pictures of their children and pets, enabling borrowers to find the lenders of their dreams. It’s hard to read them and not get hooked. Though some borrowers have prosaic needs, like trying to consolidate their loans or to fund home improvements, there are people facing eviction, medical bills to be paid and even a "Christian wife" trying to reverse her new husband’s vasectomy. The largely male lender community seemed eager to fund one woman’s breast-augmentation surgery, giving her a rate several percentage points below what her surgeon was offering.

Lenders also have the opportunity to offer microloans to offbeat small businesses — cat breeders, doll makers, ticket brokers. When I bid, it often feels like I’m voting on the soundness of a business plan.

Lenders can bid in increments as small as $50. One particularly enticing loan request for $6,000 garnered 95 bids. The borrower, who had excellent credit, began the bidding at 9.75%. Toward the end, eager lenders competed to lend money at increasingly modest rates. The loan was shared by 39 different people at a final annual rate of 8.43%. So long as she doesn’t default, the woman’s lenders will receive 7%.

Prosper was started by Chris Larsen, the co-founder of online mortgage broker E-Loan. Mr. Larsen says he wants to take on the credit-card companies who promote revolving, no-end-in-sight debt and the "payday" lenders whose annualized interest charges can easily exceed 400%. Although the level of involvement has been growing since Prosper opened to the public in February, the volume remains low, with only about 1,000 loans funded so far.

To participate, borrowers and lenders must submit to a credit check and then link their bank accounts to their Prosper account. All money transfers are automated, simplifying the repayment process. When a payment is due, Prosper withdraws the money from the borrower’s bank account and deposits it, on a pro-rata basis, into the various lenders’ Prosper accounts. The site, which imposes a 24% cap on interest rates, charges borrowers a 1% fee and lenders an annual half-percentage-point fee.

There’s always the risk of default, and in the event a borrower fails to pay the loan, it is turned over to one of the three collection agencies Prosper has contracts with. Prosper also encourages its borrowers to form "groups," which serve as mini credit unions. Should a member miss a payment, the group’s leader is contacted before the collection agency.

For every loan request that gets funded, there are many that fail, often because the borrower doesn’t offer a high enough interest rate to match his or her credit grade. All borrowers are assigned a grade based on their credit score with Experian, a credit-rating service. The highest is "AA," which the site says has a historical risk of default of 0.20% for a normal debt-to-income loan. The lowest is "HR," for high risk, which the site says has a historical risk of default of 19.1% for a similar loan. The "NC" designation signifies no credit history.

There are many HR borrowers who want loans at less than 10%, when they should be offering more than 20% — and these requests are systematically ignored. Wedding loans where a prospective bride or groom seeks help to pay for their forthcoming nuptials seem to have limited appeal as well.

A’s and AA’s, however, can get funding for almost anything, if they offer enough interest. Accountants taking flying lessons, small businesses buying point-of-sale systems and board-game makers seeking to expand were all able to acquire the funds they wanted. Many of these borrowers are simply trying to shave a few points off their car and credit-card payments or to leverage their excellent score to acquire a piece of equipment for their small businesses at rates that beat the local bank’s and without reams of paperwork. Depending on the size of the loan, the most creditworthy borrowers have received loans for 7% to 15%.

Though we all want to make money, there’s a surprising element of altruism. I like women in small business and single mothers. Another lender, an investment adviser by day, is partial to borrowers with medical issues, while another professional investor is keen on people seeking educational advancement.

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