I've been lending in Prosper.com since the summer of 2007. Yes, I along with just about everyone in Prosper.com have lost money and I have not been happy with Prosper's lack of vigor in chasing after bad loans.
However, I get what I deserved. A third of my portfolio was 'D'-graded loans of which a big chunk of those have gone bad. The better graded loans definitely performed better. Even after all my losses, my current expected portfolio return is 2% which is not bad given the economic conditions we are under.
Even given my not-so-great experience as a lender in Prosper.com, I'm still excited by its prospects. Prosper.com is now re-opening with a whole new set of features such as limiting borrowers in their "peer-to-peer" lending marketplace to only those that have a credit rating of 660 and above. This is similar to what LendingClub.com does since they limit their lending to only the best prospects.
However, that's not what really excites me about Prosper.com. It is their "Open Market" initiative that really makes them interesting. In it, I can buy loans that were created by financial institutions. Unlike financial instruments such as credit-default-obligations which created very opaque financial structures, I have a lot of the same information about the loan itself that I had on the "peer-to-peer" side. What you don't get on the "Open Market" side is the description provided by the borrower and any questions and answers they may have answered which I found to be very helpful. That missing piece of information is likely not as useful since the financial institution probably asked similar questions themselves.
Another very interesting aspect of the re-launch is the upcoming existing loans trading platform. This allows me to either sell my loans at a discount to other lenders so I can effectively "cash-out" or I can buy already-seasoned loans from other lenders (i.e. originators) and just take their position in the loan.
Now, if they only would start allowing lenders in Kansas to start lending again...