You know, financial theory pretty much has this theory of people lending directly to each other not looking so good.

Quite frankly, you have zero predictive ability to outperform the market, particularly over an extended timespan or multiple credit cycles.

Furthermore, even if you were to "average out" / index your portfolio of P2P loans, your transaction costs would be way higher than simply going through a financial institution that streamlines that process for you so as to minimize transaction costs.

Aside from legal reasons, this is one reason stocks and other financial instruments aren't sold P2P. Considering transaction costs are probably the biggest controllable variable affecting your portfolio's returns, particularly over time, I just can't see how this makes the cost of borrowing go down for the system as a whole.