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prosper.jpgSan Francisco’s Prospser, which appears to have gained a leadership position in person-to-person lending, has raised $20 million in its third round of financing.

Prosper is one of three upstarts in the person-to-person lending market, where borrowers request loans and have ordinary people bid to finance them. The market is still relatively obscure, but its participants have ambitions of replacing banks as the de facto source for small-to-medium sized personal loans. It’s a multi-billion dollar dream.

Prosper, which we’ve previously covered, says it has had over 330,000 people transact around $70 million in loans.

Zopa has had success in the UK, garnering around 150,000 users, according to its newsletter last month, but has yet to make its move into the U.S. It has has raised serious money to do so.

LendingClub, which just launched with the Facebook Platform, (see coverage here) recently announced that it had closed 13 loans for a total of $39,650 and processed 200 loan applications in about a month.

Prosper’s new round, led by DAG Ventures and Meritech Capital Partners, brings the total invested in the company to $40 million. Previous investors, including Accel Partners and Benchmark Capital, also participated.

Updated: Corrected funding reference to $20M