I've been playing around with BTCJam for the last couple of months. I have about a 10% default rate, but the loans are around 30% so I am netting 20% for the time being.
I really like the idea of p-2-p lending (ala prosper.com), but I am just too worried that the BTC will vanish the instant I put some real numbers into the account. My gut tells me these BTCJam guys are legit, however.
You really think you are getting a 20% return!?!?! If you say you are getting 30% per loan and you have a 10% default rate and then do 30-10 = 20, then you are dumber than a 4th grader, since even my 4th grade son knows that's not how you calculate it. Following your logic, if you have a 30% default rate, you will be even. Well ... nope.
Let's look at an example.
For simplicity (it seems that you will need that) let's say you make 10 loans of $100 each, at 30%. Three of your loans (30%) will default, and the other 7 will pay back $130 each. You invested $1,000 and you got back $910 (7 x $130). That's a 9% loss. Welcome to the wonderful world of financial math.
FM