It's been about 15 months since I opened my Lending Club account. I think I've decided my foray into P2P lending is pretty much done; I've stopped reinvesting and will begin to pull out. Like most there was the initial euphoria of opening an account, pouring through the notes to "pick the best ones", setting my ideal filters, and then watching the initial returns calculated by LC showing ~20% returns. Woohoo, big money! In the back of my mind, I knew those weren't sustainable long-term returns, but it was still fun to see.
Over time, reinvesting became more of a chore and hassle. Then the institutional money poured in and it became nearly impossible to actually fund my C - F grade notes. That was annoying. Availability seems to improve occasionally and the Prime feature can also save you the hassle. After you get past a year or so, you're maybe looking at 10-12% actual returns in the riskier classes. Long-term, hard to say. MMM basically says as much as I think he noted an adjusted return of 11% on his portfolio after projecting in expected defaults by class.
Anyhow, the tipping point came when I did my taxes this year. What a pain for Lending Club, particularly trying to deal with the defaulted loans. You have to enter them in individually and there's not even clear agreement on exactly how and where to do this. Not to mention, you receive very unfavorable tax treatment on the gains. They're short-term holdings that get walloped with taxes.
At the end of the day, you'll achieve much better long-term post tax gains from a proven low cost index fund in something like the S&P 500. I tried to convince myself it was a good diversification option to stocks, but for the hassle, I'd probably be better off just investing in the junk bond class at Vanguard.
Anyhow, Lending Club has clearly lost its luster on me. For awhile, it satisfied that itch for wanting to do more active investing that I felt I had more control over. No more. I'm curious to hear about the experience of others and if you plan to stay with Lending Club as part of your investment strategy long-term.