What convinced me to switch was this Invest Like a Boss podcast (episode 13) comparing PeerStreet and Lending Club.
That podcast is
really weak. Full of misleading comparisons. For example...
1. They say LC loans are min 3 year whereas PS loans are 1 year, so PS is better.
MISLEADING AS HECK. LC loans have 3 year maturity, but they are fully amortized, with equal payments. That means that the average time the borrower has your money is 1.5 years. The technical term for this is "duration". Three year fully amortized loans have a duration of 1.5 years. But wait, there's more. The LC consumer loans are heavily prepaid. There is so much prepayment that after considering prepayments, the duration is actually about 1 year.
PS loans are not fully amortized. They are interest only with a big balloon payment at the end. This means their duration is almost the same as their maturity. About 1 year.
Now when we compare duration of LC loans vs duration of PS loans, we see that they're about the same.
2. They say that PS has never had a default! Wow. Sounds incredible. (Later note added that 1 had in fact defaulted.)
MISLEADING AS HECK. The company is only about 1 year old, and they offer 1 year balloon payment loans! If a balloon payment loan is gonna default, the most likely time for it to default is when that balloon payment is due, and very few of PS's loans have had that balloon payment come due! The only loans that have come due so far are the ones that were issued way back when the company started, and of course the company started small and grew, so this is VERY FEW loans indeed. Few loans have defaulted because few have had their balloons come due.
To get a better handle on what's happening, you need the data on all the loans. Oops. Does PS even publish the data? Then they would have to have been around long enough to accumulate data in significant quantity to provide meaningful information.
The good things I discovered about PS after reading their web site are
1. They compute Loan-to-Value ratio using the "as is" value estimate, rather than the "after remodeling" value estimate that some other RE P2P sites use. When the lender takes over the property on a failed loan, chances are the remodeling hasn't been done, or hasn't been completed, or didn't really improve the value. "as is" is much more likely to be representative of the value you could get from a foreclosed property.
2. Backed by some well known VCs, which means there's a chance of some adult supervision.