WASHINGTON — A New York City social worker needs $6,800 to pay off credit card debt. A 38-year-old single mother of two living on disability and child support in Texas needs $2,000 to catch up on monthly bills. A pair of Wisconsin newlyweds need $4,000 to pay off their wedding and medical bills after the groom was treated for cancer.

But instead of going to a bank, they're asking total strangers for money. On the Internet.

Bringing together people in need of money with people who have a little to lend is the idea behind the online social lending venture called Prosper.com.

Prosper, based in San Francisco, aspires to do for money what eBay did for your grandmother's teapot collection — create a person-to-person marketplace for consumer loans, and in the process, turn average people into bankers.

"Instead of selling your money to a bank to see the bank sell that money to someone else at 19 percent, why can't I have some of that money?" Chief Executive Chris Larsen said.

Prosper seeks to fill a need for small unsecured loans up to $25,000 that banks have largely abandoned or serve primarily through credit cards, which often come with complex terms and conditions that can change at any time. By contrast, all loans on Prosper last three years with a fixed interest rate and no prepayment penalties.

Banking experts have called Prosper innovative but argue its long-term viability depends on how it defends itself from fraud.

Larsen, who founded the online lender E-loan, started Prosper three years ago with $20 million from such Silicon Valley investors as Benchmark Capital and eBay founder Pierre Omidyar. Since last year when it went live, Prosper has grown to more than 140,000 members and has originated about $33 million in loans. Less than 1 percent of its loans have defaulted; close to 3 percent of its loans are at least three months late.

Prosper isn't a bank because it doesn't accept deposits. It is, however, licensed as a lender on the state level, so interest-rate limits and other state loan laws apply, said Consumer Union's Gail Hillebrand. As a lender, Prosper is also subject to federal laws like the Truth in Lending Act that require disclosure of interest rates and other terms to consumers.

Prosper verifies a potential borrower's identity using his name, address, date of birth and Social Security number. The company also pulls the applicant's credit report to create a "credit grade" ranging from AA to HR (for high risk). The grade is included in the listing, along with any state interest rate limits. Virginia borrowers, for example, can't be charged more than 12 percent interest except by a chartered bank such as Citibank. Prospective lenders then bid to fund the loan.

Lenders, who can finance small pieces of many loans, get a chance to earn higher returns than they might find elsewhere, but it's not simply a numbers game. They get a borrower's story, how much money they want to borrow, the interest rate they're willing to pay, and the reason they need the money, along with monthly income and expenses. Often, pictures of borrowers, their dog or their children accompany the pitch.

Once a loan is funded, Prosper charges borrowers a 1 percent origination fee and charges lenders an annual fee of 0.5 percent to service the loans. It automatically withdraws payments from borrowers' bank accounts and sends them to lenders. It also deals with defaults. It charges late fees. Any loans that are 30 days late go to a collection agency. Debts at least four months past due are sold to debt buyers.

Lenders are encouraged to protect themselves by lending small amounts to many borrowers with different risk levels so if one defaults, the lender is not as seriously harmed financially.

Though some borrowers pay interest rates upward of 20 percent, the loans can still be cheaper than other forms of credit, such as a payday loan, which can carry a triple-digit annual interest rate.