I’m a young investor and want your thoughts on peer-to-peer lending. Sites like LendingClub.com are pretty open about returns, default rates, etc. Based on the past three years, this has been a pretty reliable way to get an approximately 10% compound return. I realize that peer-to-peer lending doesn’t have the 70-year history of stocks and bonds, but what do you think about making it a small part of my portfolio?
Over the last several years, peer-to-peer lending (P2P) has been growing in popularity. One P2P Web site, Prosper.com, has nearly a million members. Popularity does not necessarily mean an investment is worthy of your consideration.
P2P is an alternative means for individuals to borrow and lend directly from and to each other, supposedly cutting out financial intermediaries such as banks. The activity is arranged through Web sites as Prosper.com and LendingClub.com. The sites typically charge loan servicing fees averaging 1% annually.
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