You can split your funds up and lend to hundreds or thousands of notes at a time, giving you much better diversification to limit the loss you would take should a borrower fail to repay their loan. But investors wanting just a broad cross-section of loans can invest their available cash in just a few clicks. Any estimates based on past performance do not guarantee future performance, and prior to making any investment you should discuss your specific investment needs or seek advice from a qualified professional. I now have accounts at both companies, and I continue to add new money to my investments in each. The borrowers given an A rating are less likely to default on their loans while those with an E are more likely. My observation is that I NEVER had any issue with a note on Prosper. Two well-known players in the P2P lending space are LendingClub and Prosper. Sorry all to disappoint you but stay away. [July 04, 2017] I just tried to setup an investor account in Prosper from NC, and it halted me… You need to add NC to the exclusion list of states prohibiting investments in prosper. I hold 40K with LC and 25K in Prosper. I invest manually and selectively in both accounts, using the exact same criteria. All products are presented without warranty. Check out other great ways to invest by reading our M1 Finance Investing Review as well. In the future I will avoid all P2P lenders at all costs. And I never saw the money back, not a penny of it (I wonder why LC who just gave them like 20k couldn’t just cancel the loan and get back, at least some of it? I also add rentals to my portfolio (cash flow and powerful tax advantages). Prosper have generally more predictive data and this have a better resource for setting interest rates and completing risk management. Lending Club works by screening borrowers and facilitating the transactions from borrowers and investors. Both companies allow fully manual investing for those who want to select their own investments. We may, however, receive compensation from the issuers of some products mentioned in this article. I have been very happy with my returns at both companies (over 10%). The investor gets less and less information, and they make it easier and easier on the borrower. N.B: it is worth mentioning that as time goes by, LC is REMOVING investing tools. Of course, there is a but. There is no public information as to how Prosper calculates their interest rates, but we do know they take into account credit data such as number of inquiries, available credit, credit card utilization, and recent delinquencies. I could invest 4 times a day (they release new notes 4 times a day) even with my very picky high return selection criteria. The first thing for P2P investors to consider is whether or not P2P lending is available in their state. In working towards the goal of financial independence, many ways exist to earn a return on your money, including 401ks, real estate, or mutual funds. Imagine my loan was actually for $35,000. Lending Club is legit for both investors and borrowers. On the other hand, I’ve tried to invest with Prosper, but talking with their customer service reps on the phone really shook my confidence in the company. Even though the loans state 12% and greater, my returns are 3% and lower. Prosper edged out Lending Club for five of six years and tied with it the other year. I echo Damien’s comments and share the same experiences. However, even with Prosper's one year advantage, Lending Club has managed to facilitate the funding of nearly $20 Billion more to borrowers! I have been with Prosper since the beginning and have achieved much better returns versus Lending Club. If you want further proof: https://www.lendingclub.com/info/statistics-performance.action. Social lending provides great alternatives to both regular bank loans and credit cards for borrowers and high yield savings accounts and stocks for investors. At Lending Club, investors say they typically find it easier and faster to spread around their money by investing in dozens of loans at a time. Furthermore, now I’m seeing some days the only “new” notes added to the platform are not really new. While Lending Club issues each borrower a "grade", Prosper issues them a rating to help you determine the level of risk in loaning to this applicant. On the other hand, Prosper's interest rates are higher, which can help generate higher returns, but those higher interest rates also likely indicate higher risk borrowers that could more likely default. It's available to investors in all states (including District of Columbia) except the following: Alabama, Arizona, Arkansas, Iowa, Kansas, Kentucky, Maryland, Massachusetts, Nebraska, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, and Vermont. Also check out the reviews for each company on CreditKarma.com. These regulations help to minimize fraud and protect the investors. My returns over that past 4.5 years have been 7.9+. However, there is an additional list of states available for investors via the Lending Club trading platform FolioFN. If you don’t have time to manage your money and are interested in getting a 6%+ return, then you might as well join. There was however significant overlap. Enter the amount you want to invest (or just let them invest your available cash) and just a couple of clicks later you are done. I am not going to make a recommendation between Lending Club or Prosper. Statistics are courtesy of LendStats.com. I am also concern the economy might hit another recession and we would see greater default. Current ROI over 2 years is meager 3.01%. It would be interesting to see how Upstart compares to these companies as it’s ranked #1 here: http://www.investopedia.com/articles/investing/092315/7-best-peertopeer-lending-websites.asp, but I don’t see it at all mentioned on this site. You are able to select the grade of applicant, which will impact your potential return - higher risk loans get higher rewards in the form of an increased interest rate at the cost of an increased chance of default. Prosper (see my Prosper review) was the first P2P lending company, launched in February 2006. EnergyFunders Review 2021 – Power Up Your Portfolio With Energy Investing, https://www.lendingclub.com/info/statistics-performance.action, http://www.investopedia.com/articles/investing/092315/7-best-peertopeer-lending-websites.asp, $1k-$40k consumer, $5k-50k auto, $5k-500k business, Unsecured Consumer Debt, Auto Refinancing, and Business Loans. Such non-sense…. It consistently receives industry praise for their simple yet comprehensive application process. When you invest the minimum amount of $25, you begin earning money that month from the interest payments. Make sure to read about my experience below before you invest or borrow with Lending Club. I would recommend stay away from LC with a 10 foot pole. The results are somewhat surprising to me. All products are presented without warranty. I pulled down their data and designed models on both data sets. I’ve found everything I needed to make decisions on this type of investing from your articles. Lending Club. A better loan filtering platform: Prosper’s in-platform filtering tools and Quick invest option are easier to use than LendingClub’s filtering tools, making manual investing easier. However, if you want to open an IRA with this service, the minimum investment is $5,500. With Prosper, if you manage to find a 17% interest note, don’t let it go, grab it, it might not happen again for weeks.