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Your Take: Do You Invest in Peer to Peer Lending?

When Prosper and Lending Club [3] emerged a couple years ago, I was skeptical. Back then, they promised above market returns on investment in very small loans with the added bonus of helping people out, even if on a small level. The idea was that you could make small investment, like $25, with others to fund someone’s goal. Even today, Lending Club suggests that you can earn 9.43% on C Grade creditors, 8.26% on B Grade creditors, and 5.81% on A Grade creditors. By diversifying, the thought is that you could get pretty close to these returns even with defaults, since a default would cost you very little relative to your investment. I never got involved because, at least years ago, residents of Maryland couldn’t invest in these securities.

With a few years of history, you can finally see if those promises are true and a site like Lendstats.com [4] puts it all out there for you. It turns out that the yields aren’t as high as the sites promise but they’re fairly close. If you want to see a real time experiment, Jonathan at My Money Blog [5] is putting $5,000 into 200 loans at $25 each to compare them as investments. I’m interested to hear his take on it as he goes. (My friend Nickel just wrote about the results of his three year investment [6] – not that impressive)

Have you done any investing with Lending Club or Prosper?