My own comments on Prosper.com and a response to your post:
http:// commentocracy.blogspot.co...prospercom.html
Doug | Homepage | 02.17.08 - 9:10 am | #

"as the risk of an investment goes up, an investor should earn a higher return to compensate" ... this is why the default rate is added.

Generally you should demand a rate at least that equals risk free + default rate + liquidity & interest rate risk .. as the default risk goes up, this goes up.

Aside from that I totally agree with this post. P2P loans are great from a personal perspective or perhaps a charity perspective but as a business , it makes little sense (to me).

I especially noted the comparison to Toyota corporate bonds. Indeed! Junk bonds and even well rated corporate bonds pay as well as P2P. Their default rate is less (means less psychic damage) and they have almost zero liquidity risk. And to diversify one can simply buy an ETF (diversification is possible with P2P too now).
Early Retirement Extreme | Homepage | 02.20.08 - 11:25 am | #