San Francisco - Prosper, on online people-to-people lending marketplace co-founded by E-Loan co-founder Chris Larsen, said on Wednesday that it has raised $20 million in its third round of funding, co-led by DAG Ventures and Meritech Capital Partners.

Previous investors Accel Partners, Benchmark Capital, Fidelity Ventures and Omidyar Network also participated in the round, which increased the company's total backing to $40 million.

Since launching in early 2006, Prosper's membership has grown to over 330,000 individuals with $70 million in loans funded its marketplace.

The company's online auction platform allows people to list and bid on loans. People who want to borrow create loan listings for up to $25,000 and set the maximum rate they are willing to pay a lender. Lenders then bid down the interest rate.

Prosper handles all loan administration tasks, including loan repayment and collections, on behalf of the matched borrowers and lenders.

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http://www.prosper.com