Isn't the idea that each loan is high risk (hence high interest) but you can still expect a good return if you issue hundreds of such loans and each loan is tiny?
PeerStreet has had zero losses, but these are asset backed loans with first position liens, so if a borrower were to stop paying then generally the property would be foreclosed on and principal and interest would be repaid from the proceeds. That's why conservative LTV is important. Your point about the benefit of diversification is correct, previously the limited investors who had access to these investments would have to make large bets on individual loans. PeerStreet makes it much easier to invest in these loans and diversify across lender, geography and loans.
How can these loans be such high risk with low LTV ratio, and backed by a physical asset? If somebody stops paying, can't they simply take possession of their real property to recoup losses?