When Prosper and Lending Club  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  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  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  – not that impressive)
Have you done any investing with Lending Club or Prosper?