I researched the prominent sites--Prosper, LendingClub, and Zopa. Back in March there were fewer sites than now.
I decided that I would commit equal sums to both Prosper and LendingClub to try the experience and see what I liked, disliked, and where I got the better return.
Here is how I have done since March. Prosper: 22.68% APY with 0 defaults. LendingClub 12.78% APY with 4 loans late on their payments. If all 4 loans default, my eventual APY will be something to the tune of -8%.
LendingClub has two things going for it:
- Currently they are the only SEC approved P2P site
- The minimum loan denomination is only $25 making it easier to diversify your portfolio with a smaller sum of money (the min amount is $50 with Prosper).
However, these benefits don't outweigh what Prosper has going for it:
- Transparency with the community. On Prosper, it is easy to sort by lenders that already have personal friends, or borrower groups, invested in that person. This means that a network of personal and close associates have incentives to keep the lender from defaulting on the loan. This helps keep ROI up and defaults low.
- Prosper has an auction system rather than pre-determined rates-of-return like lendingclub. This allows you to find "deals" or expected rates-of-return above the market rate due to inefficiencies with the market.