How to Play $1K: Powerful P2P Loans

Editor's note: Not drowning in debt? Have $1,000 to put to work? TheStreet.com senior correspondent and You're So Money author Farnoosh Torabi looks at peer-to-peer lending.

This week I'm giving my $1,000 to a complete stranger on the Internet.

No, I'm not answering one of the few dozen Nigerian money transfer pleas I receive each week in my Spam inbox. Instead, I'm heading to a peer-to-peer (or "P2P") lending Website -- like Prosper (prosper.com), Lending Club (lendingclub.com) or Zopa (zopa.com) -- where I understand folks can earn much more on their investments than the current average of three percent that banks are offering on various savings vehicles, such as CDs and savings accounts.

P2P finance connects individual borrowers -- of various credit standings -- seeking everyday loans, without the pricey interest rates at traditional banks with borrowers looking to get more bang for their investible buck. ...