For borrowers, a timed loan (also known as a loan auction) is the most effective way to get a competitive rate on the loan, but it comes with risks which should give someone getting a loan on Prosper.com pause and consideration to Automatic Funding.

Normally, a loan will be setup for funding for a period of 3-9 days, in that period people can bid and when the loan is fully funded, lenders begin to compete to bring the overall interest rate down. I've seen some AA loans go from 14 to 7% this way.

But from a lenders perspective, this is not as attractive. A lender would like to know that a bid placed will stay there and be part of a loan that is fully funded. Nothing worse for a lender than to tie up money for a week while a loan flounders and does not get funded.

Lenders tend to like automatic funding, so if you want to attract lenders it might make more sense for a borrower to use this option and thus increase the chances of getting funded. Many, if not most loans do not get 100% funded. If you know you are a very attractive prospect, give the timed funding option a shot, you can always relist, but if you are not as attractive and need the money quickly, Automatic funding may be the best option for you.