thingylab

I would tend to agree with that.

This being said, investing in real estate is the only way for a regular person to achieve a high leverage ratio, which is probably why people see it as such a good investment.

Well, a credit history tells you whether a borrower paid his credit card bill last month, not if he is going to have a job next month. My point is not that people will try to run away with your money, but that holding 100+ notes from Lending Club might not be the diversified investment it appears to be, especially when some macro event happens.

Peer to peer lending being somewhat new, I would say some of the borrowers think it's cool. Some of them might also be making a principled choice ("banks are evil"). But ultimately, if you have a reasonnably good credit profile it should be noticeably cheaper than the average traditional lender with its branch network etc.

I like those platforms in principle, but I don't think investors reallly understand what's in it. The truth is, you're creating your own asset-backed security based on loans originated to refinance credit card loans or finance personal projects for what is (I assume) a pretty narrow slice of the population.

Just like banks and other players (ahem rating agencies) before the financial crisis assumed ABS were safe because they were diversified ("the housing market cannot collapse uniformly accros the country"), they can actually become very correlated in a very short amount of time.

So even though peer-to-peer lending is an interesting proposition, it is important to understand that it can potentially become ugly and sticky...