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How Bidding Works

Example: Loan Request for $1,000, with an Initial Offered Interest Rate 9%. Lenders all qualify to lend based on their diversification limits in this example. (that is bids cannot exceed the lessor of, 10% of the Loan, or 10% of the Lender Account balance). This is an illustration of some aspects of bidding. Please note the full bidding rules follow below, as contained in the Lender Registration and Account Agreement.

  1. Step 1 »

    At this stage seven bids have been placed by seven lenders. Loan is fully funded at the initial Offered Interest Rate of 9%. When the Borrower made the Loan Request, he chose to allow the auction to move to competitive bidding after the Loan Request was filled, therefore bidding can continue. The Borrower has the choice to close the auction, now that it is fully funded, however in this example the auction proceeds.

    Lender Bid Secret Rate
    A $100 7%
    B $200 7%
    C $200 8%
    D $200 8.5%
    E $100 8%
    F $100 7.75%
    G $100 7.25%

    The Auction is Competitive.

    • Current Offered Interest Rate will be 8.5% (highest Secret Rate of successful Bids).
    • Highest Acceptable Bid will be 8.45% (current Offered Interest Rate less 0.05%)
    • If the Loan gets no Bids at this rate, the Loan will still fund at the initial Offered Interest Rate of 9%, because no competitive Bids have been made.

  2. Step 2 »

    New Bid

    Lender Bid Secret Rate
    H $100 7%

    H replaces part of D. D was the highest Secret Rate bid so is first to lose to a Bid with a lower secret rate.

    So successful Bids now look like:

    Bids

    Lender Bid Secret Rate
    A $100 7%
    B $200 7%
    C $200 8%
    D $100 8.5%
    E $100 8%
    F $100 7.75%
    G $100 7.25%
    H $100 7%

    The Loan is now in a competitive auction. The current Offered Interest Rate will still be 8.5% (highest Secret Rate of successful Bid).

    The highest Acceptable Bid will still be 8.45%.

  3. Step 3 »

    New Bid

    Lender Bid Secret Rate
    I $200 7%

    Lender I replaces all of the rest of Lender D's Bid ($100) (because D has the highest Secret Rate), and all of E's Bid ($100) (as a result of the application of LIFO rule - 'Last In First Out' with the same rate. Note that C remains in.)

    Successful Bids now look like:

    Bids

    Lender Bid Secret Rate
    A $100 7%
    B $200 7%
    C $200 8%
    D $100 8.5%
    E $100 8%
    F $100 7.75%
    G $100 7.25%
    H $100 7%
    I $200 7%

    The current Offered Interest Rate will be 8 %.

    The highest Acceptable Bid will be 7.95%.

  4. Step 4 »

    New Bid

    Lender Bid Secret Rate
    J $200 7%

    Lender J replaces Lender C highest remaining secret rate Lender C

    Successful Bids now look like:

    Bids

    Lender Bid Secret Rate
    A $100 7%
    B $200 7%
    C $200 8%
    F $100 7.75%
    G $100 7.25%
    H $100 7%
    I $200 7%
    J $200 7%

    The current Offered Interest Rate will still be 7.75 %.

    The highest Acceptable Bid will still be 7.70%.

  5. Step 5 »

    New Bid

    Lender Bid Secret Rate
    K $100 7.5%

    Lender K Bid will only be accepted for $100 to replace Lender F but the bid of 7.50% is insufficient to beat any other Lenders Bids.

    Successful Bids now look like:

    Bids

    Lender Bid Secret Rate
    A $100 7%
    B $200 7%
    F $100 7.75%
    G $100 7.25%
    H $100 7%
    I $200 7%
    j $200 7%
    K $100 7.50%

    The current Offered Interest Rate will be 7.50 %.

    The highest Acceptable Bid will be 7.45%.

  6. Conclusion »

    If there are no more Bids, this Loan will fund at 7.50% (which was the current Offered Interest Rate when the last Bid was accepted).

    Full Bidding Rules

    Please refer to full bidding rules in the Lender Registration and Account Agreement

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