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I've been lending p2p for about eight years (since the beginning.) My returns from 2006-2009, as reported by Prosper, were -0.5% annualized. My returns from 2010-2014, as reported by Lending Club, are 14.04% annualized after accounting for the probability that currently late loans will eventually default. I have 1003 loans whose average age is 14.5 months.
IMO the big risk in p2p lending isn't recession. We've just been through possibly the worst recession I'll see in my lifetime, and my p2p portfolio roughly broke even--far better than stocks.
I think the real risk is the possible insolvency of the platforms (Lending Club and Prosper). If one should go under, there could be trouble for investors, although both have agreements with third-party banks who will (attempt to) service existing loans should the platforms be unable to.
For me p2p loans are a good portfolio diversifier. (They make up only about 3% of my investments, though I am working to increase that.) While stocks and bonds gyrate, my p2p loans just keep chugging along.
For retirees what's interesting about p2p is that in most years there is very little variation in return. That means sequence-of-return risk is less than with, say, stocks, and the safe withdrawal rate should be closer to the mean annual return of the asset class.
There are plenty of free, third-party tools that allow you to backtest loan-selection strategies against the hundreds of thousands of p2p loans that have been made since 2006. That's not a long history, but you have to start somewhere.
As far as the difficulty of selecting so many loans: I select loans manually, but with mechanical criteria. I'd estimate it takes me an average of 15 seconds to find each loan I invest in. So do the math, and you'll see how long it might take you to build a portfolio. On Lending Club no investor with at least 800 loans has ever lost money.
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And if I claim to be a wise man, it surely means that I don't know.
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