Auto-funding vs Non-auto-funding | P2P Lending, Peer to Peer Lending, People to People Lending

AF vs NAF

I have already blogged my affinity for standing orders over manual orders. Given the choice and the current standing order options I would prefer only auto-funding loans, but there are too many good NAF for this to be the correct strategy.

With auto-finding loans the interest rate is known so the question is whether or not the loan will get funded… Well, at the levels at which my orders fire the loan will get funded so problem solved. ;-p

Why are non-auto-funding loans a problem? A NAF is a problem because as a borrower the optimum strategy is to put your loan out for bid at an interest rate that will get funded and watch as the manual bidders bid the loan interest rate down. While this strategy can backfire with a higher interest rate, it all but guarantees your loan is funded. So what happens is my standing order fires and bids on a loan, helping to get the loan 100% funded. Then over time (sometimes as much as 9 days) my order gets out bid leaving me with nothing to show for the effort (when are we getting interest on our accounts?).

In the long run, the number of quality loans in both AF and NAF categories requires that I participate in both types of loan… And I believe in standing orders. So for now I grin an bear it… but maybe Prosper.com will see fit to add a time remaining option to the standing order offering.

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