I try and look objectively at both Lending Club and Prosper – but as we have discussed before I do look at things in a more positive way than most. The bottom line for me is are they producing excellent returns for investors. If the answer is yes, which it has been for me, then I will continue to be a cheerleader for the industry.

I can see the answer coming now. Some BS about constantly reassessing risks & combined with spin, propaganda & more BS. All that would be completely expected. The only thing that remains to be seen is whether you, Peter, allows them to get away with it or not.

Really? I think that’s a pretty safe bet considering that it can’t actually be any higher than 8.5% unless some of the late loans come back to life. Fat chance of that occurring. Furthermore, if ever single one of the close to 900 notes still out there remains current & completes the 3 years then it’ll come in at 8.5%. That, of course won’t happen either. My best estimate is that another 40-50 of the current notes will go bad before it’s all said & done. So it should end up at 8%. A good number no doubt, but keep in mind this is a number achieved when investors set the interest rates, as opposed to how it is today with Prosper 2.5 (post Dec 2010) where Prosper sets the rate.

What would be great would be to see the difference between the return that was promoted and the final return. According to Lendstats the returns for Lending Club loans issued in 2008 (which have all reach maturity now) was around 2%. Not a great return at all and nowhere near the 9% number bandied around back then. We know Prosper’s numbers from that year are much worse.

It will be interesting to see by the end of this year how the small batch of loans issued by Prosper in 2009 fared. So far, it is looking pretty good but it will most likely be well below 10%.

I am chatting with Joe Toms, Prosper’s chief investment officer later this week and I will certainly raise this issue with him. A look back at actual returns versus predicted returns would be very useful for investors.

So there’s still a wide range. My assumption is that it will ultimately end up around 8.5 – 9%, which is still a good return (and better than LC), but short of what Prosper is predicting.

My personal mindset has always been to under-promise and over-deliver. In my opinion, the only reason for Prosper to have posted that 10.69% would if they were expecting returns to come in at 11 or 11.5% percent. Likewise, if they were predicting 10.69%, personally, I would have put out a number closer to (or below) 10%. 10% is still above LC, but it gives them a little wiggle room (especially when they don’t have a lot of historical data). If you predict 10% and the ROI is only 9.5%, people will be a lot less jaded than if you predicted 10.69%. But that’s just my humble opinion…

Maybe this is me being a little jaded, but my other view is that they are currently projecting less than 10.69% for this specific subset of Notes. Why change the subset of Notes and have the ROI go down unless the ROI went down a lot further if they kept with the same subset? Obviously, they are trying to keep with the 10-month “seasoned loans,” but it’s still a question in the back of my mind.

Overall, it is really difficult for me to trust anything that comes from Prosper. The problem is that, a year later, my investment is still doing well. So I’m just a little conflicted over Prosper. In the end, though, regardless of what Prosper puts out there the only thing that really matters is whether I’m making money. As long as I’m making money, and the ROI is higher than I can get elsewhere for the same or less risk then I’ll stick with them. So far that has been the case…

I was on an Ohio class. I have had a chance to see some subs from other countries. Its very interesting to see the differences and similarities. The deep rooted traditions all show up as well.

Jason