There is often chatter within the Propser.com Forums regarding the amount of time money remains in limbo while being transferred, and once a bid is placed.
I think one of the reasons many loans don’t ever get funded is because they never get any early interest. I have personally found what I think are some very good loans and invested early only to see the loan funded at 3% after 9 days. That’s 9 days of money sitting idle with no return and no loan to show for it.
Then there are the instances where loans are funded very quickly at a good rate and then the bidding war ensues for 7 of the 9 days when a decent interest rate is halved because so many bidders have so much time to bid the rate down. While this benefits borrowers, the lenders are often being undercut and forced to spend time bidding on loan after loan only to be constantly outbid.
There are too few fully funded loans on auction to keep the interest rate high enough to make the loan investable.
My suggestion to solve this problem is to have a maximum of 24 hours for auctioning once the loan is fully funded. How would this work? Well, take for example a $1,000 loan with an auction duration of 9 days. Since it’s a small amount, the loan (let’s assume it’s very investable) will get funded quickly, let’s say in 1 day it’s at 100%. Is it fair to make lenders wait 8 days before their funds are generating interest? Why not limit the time.
If there was a rule in place that would give the loan auction 24 hours to bid down the rate instead of 8 days it would solve 2 problems: lenders would be more likely to invest in loans early and the interest rate wouldn’t be bid down to unreasonably low levels.