In the aftermath of the SEC’s initial regulation of the peer-to-peer lending industry in the United States, Lending Club and Prosper Marketplace have become the two remaining dominant forces in the industry of peer-to-peer lending in the United States. Both of these companies offer investors an alternative investment to stocks, real estate, bonds and cash investments in the form of allowing investors to fund consumer loans. The question remains: Prosper Vs Lending Club, which company has the best peer to peer lending offer?

Investing in peer-to-peer personal loans through Prosper or Lending Club likely should not become your primary investment vehicle, but it might be a great way to add diversification to your portfolio by investing 5% to 10% of your assets in these services as a way to hedge against other classes of investments. We are now left with the question of which of these companies should the peer-to-peer lending investor use to invest in unsecured loans.

When shopping for stocks, bonds or mutual funds from a broker, often you are concerned about the investment expenses, but with peer-to-peer lending companies, the expenses are generally about the same between Lending Club and Prosper. However, there are a number of other factors that should be taken into consideration.

As an individual investor, you want to place your money into the marketplace that will have the most profitable loans for you. You’ll want to know which company has had historically lower default rates and which company does a better job of screening their borrowers. You’ll want to know which company is more effective at collections and which company will provide you the best interest rate on your money at the end of the day.

Both Prosper and Lending Club have had slightly higher than expected delinquency rates in their early days. A high percentage of the loans that Prosper had originated during its first couple of years of operation have gone delinquent. Lending Club appears to have done a better job of screening its borrowers, mostly because they have a higher credit score requirement. You should expect that about 8-10% of your loans will go into default when investing.

When a loan does go into delinquency, Lending Club does a far better job of collections than its competitor Prosper. They have a system emails, telephone calls and skip tracing to remind the customer of their obligations to repay their loan. Prosper has been criticized in the past for not doing nearly enough to collect from its delinquent borrowers.

The rates that you’ll get from borrowers on both companies can vary. Prosper uses a reverse Dutch auction system where investors bid an amount of money they are willing to loan at a fixed interest rate. Lending Club offers flat rates to borrowers based on their credit scores. Depending on the situation, either company could yield better interest rates for investors.