If you were to perform a Google search for Prosper.com or Lending Club, you would find the word “scam” in the list of autocomplete suggestions provided by Google. The words “lending club scam” and “prosper.com scam” are commonly searched for not because Prosper.com and Lending Club are operating outside of regulatory approval or are illegitimate in some other way, but because people have natural concerns over peer-to-peer lending and financial innovation.

Although there is no Lending Club scam, Having a reasonable level of concern over new financial products is perfectly natural and very prudent. After all, the world is riddled with financial scams. Just last Friday James Edward Whitley was convicted of stealing more than $9 million from investors in North Carolina. And James Whitley is only the latest in a series of criminals to be convicted for operating investment scams. Let us not forget Bernie Madoff who was sentenced to 150 years in prison for ripping off investors to the tune of $65 billion dollars.

Because peer-to-peer lending is a relatively new part of the lending world, there’s no question why “lending club scam” and “prosper.com scam” are two of the most searched terms relating to the two largest peer-to-peer lending companies in the United States. It’s perfectly healthy for people considering borrowing money from Prosper or Lending Club to have concerns whether or not they are borrowing from a reputable lender. It’s also perfectly natural for investors considering placing money into the world of peer-to-peer lending to wonder whether or not they are signing up for the next great investment scam.

If you are considering taking out a loan from Lending Club or Prosper, you can rest assured in that Prosper and Lending Club must both meet the regulatory requirements of each state that they do business in. In addition, Lending Club has a B+ rating from Redwood City’s Better Business Bureau and Prosper has a B+ rating from San Francisco’s better business bureau. You can also read experiences of individuals, such as Matt Jabs from Debt Free Adventure, who borrowed money through Lending Club.

Taking out a loan from Prosper or Lending Club is no different than taking out a loan from a bank or credit union, but there’s the possibility that you could get a much better interest rate. With Prosper and Lending Club, you will be applying for a fixed-rate, fully-amortizing loan, meaning that there’s no hidden balloon payments or variable interest rate hikes with the loans that you are taking out from either company.

If you’re an investor, you need to be even more diligent before investing in personal loans by way of Prosper or Lending Club. Like all investments, there is risk involved in peer to peer lending. Foremost, there’s risk that the borrowers you lend money to won’t repay their loans. Some of the earliest lenders in Prosper.com did not have a positive experience because there were no boundaries set in place as to who could take out a loan or what interest rates loans could be funded at. Fortunately, both Prosper and Lending Club now place reasonable safeguards in place, such as only providing loans with fixed interest rates and making sure that borrowers meet certain credit requirements, to make sure that investors make a reasonably good rate of return.

Many investors with Lending Club and Prosper, including myself, are reporting positive rates of return on their peer-to-peer lending investments. At the time of writing this article, I have $9,000 invested in Lending Club loans and am earning just over a 12% rate of return on my money. A number of other bloggers that cover the peer-to-peer lending industry have also reported similar positive experiences.

Investing in peer to peer loans is not the latest financial scam to worry about, but before diving head first into the world of peer to peer lending, you should make sure that it’s an appropriate investment for your financial situation. If you have debt and aren’t already fully funding your Roth IRA or 401K at work, investing in peer-to-peer loans probably isn’t for you.

If you still have concerns whether or not Lending Club scams consumers or whether or not Prosper.com is a scam, I would encourage you to continue to research each company. Read what the Better Business Bureau has to say about each company, look up their corporate registrations and read reviews from people have had direct personal experiences with the world of peer-to-peer lending.