My total loss from investing in Prosper will be a maximum of $248. I’m pretty sure I can live without that $248

I feel sorry for Jason, but gosh! stop comparing apples to oranges.

I did invest in Prosper. I’m making 2-3% after my share of defaults. i realize I’m not in the group who lost tons of money, but I still could go down to 0 or less. I tried Lending Club, and never went back to Prosper. Here is why:

1) Lending Club is very strict with borrowers, Prosper never was. Almost anybody could list a loan there. I think Lending Club only lets in less than 10% of the best credit borrowers.

2) Lending Club does extensive credit review and analysis. Prosper never did. They just presented whatever came from the borrower’s credit report. Looking at Lending Club’s method of assigning grades requires a doctorate degree on credit review. Prosper just assigned grade based on FICO score alone.

3) Lending Club’s collections team are ninjas compared to Prosper’s clumsy collections efforts. Just look at how much information Lending Club offers regarding the collections process for each loan. As far as i could tell, my prosper late loans kept going late with no update from the collections agency. My default rate at Lending Club is small enough that I am still making 8%+. prosper’s default rate is a joke.

4) Lending Club is very responsive and responsible to the lender community. Prosper could have not done anything more to upset lenders a bit more. Just read through prospers.org, or check out the class action suit if you are not familiar with the issues.

So, Nickel, i think you’ll do well at Lending Club. The trick is reinvesting your payments as soon as possible. Starting with $1K makes sense, but my personal opinion is that this investment does not make sense unless you are putting in $4K or more, to allow you to diversify in a meaningful way (150+ loans). Good luck.

I do agree about the crowd-sourcing aspect, though… If you compare the loans that fill up fast to those that languish and eventually expire, there’s a definite difference in apparent quality. And yes, I agree that default rates will likely climb as the average age of loans increases.

I have had to re-position about 40% of my initial lending attempts due to the loan not being fully funded by the community. Another level of protection, I feel. A bit of crowdsourcing on the credit-worthiness of the borrower. I do believe that my experience at LendingClub will be much better than the past experiences of others at Prosper, but I also realize that LC’s current results are skewed by the volume of new loans – loans don’t tend to default right away, so when new loans make up a high percentage of all outstanding loans, the return rate will be artificially high.

So far, my borrower with the A credit rating has filed for bankruptcy after paying off only 6% of the loan.

1 of my B Credit Ratings has filed for bankruptcy after paying off 10% of the loan, the second B credit rating is in Collections after paying off 68% of the loan, and the final B credit rating is in good standing and has paid off 86% of the loan.

2 of my C Credit Ratings borrowers are currently in Collections. 1 of them paid off 3% of their loan the other paid off 62%. The other 2 C Credit Rating borrowers are Current. One has paid off 55% of their loan and the other has paid off 86%.

All in total, I lended $448.75. I’ve collected $200.80 so far. In the best case scenario, if my 3 borrowers who are current on their loans pay them off in full, I will get an additional $70.53 for a total of $271…..not a very good return for my money.

I guess one thing that is important to remember as a lender on these sites, is that most borrowers using them do so because they can’t get a loan elsewhere.