What is your worst case scenario loss on P2P?

i was not thinking about it - so thanks for the extra worry   Would think losses of 20-30% are as you say a doomsday scenario or more like a stock market correction 

100%=Armageddon, so you would not have a lifestyle or time to be p****d off

100% loss on one loan is not only entirely possible it is inevitable given time. 100% loss of a platform is very unlikely but not impossible. 100% of a well diversified portfolio would indeed be Armageddon, but again not impossible.

Depends what percentage of your net worth 20k is.

Definitely stay aware from shares if you would be miffed at losing that much on paper

1) I am diversified across asset classes.

2) Within P2P / altfi I am diversified across lending strategy (SME, secured, consumer etc.).

3) Within lending strategy I am diversified across platforms.

4) Within platforms I am diversified across loans.

Further up this thread people have assessed the 'very unlikely' / 'impossible' chance of 100% loss on a given platform. I disagree. However, across the P2P asset class as a whole I agree.

The greatest risk of total loss clearly lies in 4), the least diversified element of the 'funnel'. Ergo if we're talking about the risk of total loss on a single platform, then I think it's significant.

The risk of near/total loss lies less in the loan book and more in the platform. If the platform goes pop - which some of them definitely will (it's not if, it's when) - then the risk of a near/total loss is high. Particularly if fraud comes to bear. How a disorderly administration of the loan book is then managed will be key - and performance will likely be governed by the type of loan book as much as the quality of the loan book. A platform which has a single debtor secured against a £100m property will be easy to administer, likely returning the bulk of lenders' cash. On the other hand, a platform which has 100k £1k unsecured SME loans will be an expensive nightmare to administer and there will likely be low recovery for lenders.

That's a long answer to a short question - the quick answer is: looking at any individual platform, the risk of losing the bulk of your loan book is significant (and not priced into the returns). Across the entire P2P asset class, the risk of losing the bulk of your loan book is modest.

IMHO those lenders who think they are adopting a safe strategy, focussing on platforms returning sub-5%, are adopting the riskiest strategy. Their returns simply do not reflect their risk - they are not making hay whilst the sun shines, whilst remaining fully exposed to 'armageddon'. Does any investment make sense with an upside capped at 3% (pre-tax) and an unlimited 100% downside?

I completely agree with this.   One of my largest invested amounts was in a platform which has given me over 15% return on buyback guarantee loans over the last 2 years, but I am now moving elsewhere as that return is no longer available there.   Most platforms begin well and I choose to accept the risk if they seem ok but leave when the rates drop with increasing demand.

As already mentioned in other posts I would say the major risk to loss is not the loans themselves but:
Platforms going bust will the segregated loans be safe? (I dont know)
Fraud; within the platform operating business or connected with it ie where the money is kept/administered (eg banks and solicitors)
Cyber theft at any level in the money chain associated with the platform (inc platform operator, banks/solicitors)