Most projects use a collateral. Users have to lock some collateral before they can lend, such as yield.credit. It works quite well so far, more than $800k have been loaned with more than $40k interest for its lenders. Other projects use a lending pool and collateral pool, while others do it in a pure P2P using smart contract.

The trust problem can be solved by either trusting the developer or smart contract, or you can verify how the contract works before using the platform.