P2P lending stocks offer rewards ... and risks

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We are heading into the end of the year, and this week we will see a spate of IPOs get pushed through the door.

On Wednesday night, LendingClub, the largest peer-to-peer lending service, is seeking to price 57.7 million shares at $12 to $14 a share, which is up from $10 to $12 just two days ago. Peer-to-peer lending has grown dramatically in the past few years as consumers and small-business owners are using it to bypass traditional lenders like banks.

Since LendingClub launched in 2007, it has facilitated more than $5 billion in loans, including more than $1 billion in the second quarter of 2014. That's growth. And it's turning profitable. LendingClub's competitors, of course, are banks, but in many cases they are hamstrung by regulations.

Read MoreLendingClub raises IPO price as offering nears

The flip side is equally interesting; investors use LendingClub to earn returns. I've seen considerable interest in investing in peer-to-peer lending platforms as an alternative to, say, high-yield investments.

The downside is that should the consumers whose loans you are investing in default, you have very little recourse. For personal loans, you do not have a claim on any assets, so you can get burned if the economy suddenly turns down.