Most of my remaining original loans performed, but I took most of the money out as it was repaid. This was in part because I wasn’t earning my usual income and needed the money. Occasionally I’d invest what had accumulated into a new loan.

Then I noticed that occasional loans I had invested in under the new model were performing as agreed — no defaults and few lates. So I have gradually been getting back into Prosper lending. My “net loss” was at about $450 last June, and I”m now at a positive couple hundred dollars. I know that’s not a huge amount, but it’s $650 in 9 months on what is probably an average invested amount of under $8,000, so it’s a return of better than 10%. There are a couple of borrower’s who have filed BK, so that money will be lost, but those are among the smallest loans I have, so the effect will be minimal.

Prosper characterizes what investors invest in as “Borrower-Payment-Dependent Notes.” (I think I have the terminology close.) So that menas the investor’s payment from Prosper will only arrive if Prosper has recevied the payment from the borrower. The concern, of course, is that Prosper could run into financial difficulties and “investors” in Notes would become general creditors of Prosper like the utility company, the phone company, and the computer lessor. I’m sure it’s all in the Prospectus, but most investors will not hasve read that — and certainly not with a complete understanding of the implications.

So the bottom line is it’s working for me (again) — at least so far. I haven’t investigated Lending Club, but from the comments, it sounds like the business models are now pretty similar, as are the estimated returns. We’ll see how defaults evolve as the “recovery” goes forward. On the one hand, I wonder about people for whom a 17% interest rate makes an attractive loan, but on the other, I realize that at one point one credit card company raised my rate to 30% and another cut my credit line from $30,000 to $1,300.

Best of luck to all.

My only real gripe with Lending Club is that they seem to be riding the float on loan payments and deposits I make to my account. Payments take 5-7 days to hit my account after they’ve been made. When I transfer funds from my bank account to my Lending Club account there is a similar lag. This bugs me and I’d like to see Lending Club address it.

But, overall, a good experience so far.

1) LC takes 4 days on an ACH transfer from my bank to LC – however the money leaves my bank within hours the first day – I suspect the other 3-4 days are “float” for LC (I know for a fact that most ACH transfers I do between other financial organizations take at most 12 hours from when my cash leaves one account and shows up in another account, excepting holidays/weekends);
2) LC pays no interest on money that is not yet invested (either waiting for initial investment or P&I having been repaid on existing loans)- that is a considerable sum of money given the daily cash flow of LC’s operations;
3) On defaults/late payments LC’s efforts appear to be less than satisfactory, more so in recent months;
4) Payments seemingly are all either late (on average approx. 5 days from the stated Payment Date) OR Lending Club’s processing is inefficient (the assumption is payments are generally made on the date due and it just takes LC a long time to process payments) OR WORSE – LC is purposely taking it’s time to process loans – once again for the benefit of their float.

The above being said I am a sophisticated investor (also an accredited investor by SEC rules), and have investments spread around the world. Until recently I was going to invest a large sum in LC’s operations however in the last 6 months my enthusiasm for Lending Club has diminished, despite my returns, which since early 2008 have been over 8% with defaults included. For a large portfolio in LC it would take a considerable amount of time to manage a portfolio worth a large sum of money and using the LC programmatical (automated) approach to automate your investing is no acceptable to my way of investing.

Therefore my investment in LC, while not insignificant, will no longer grow in size due to the above problems I have described.