Probably a stupid question, but why...

i dont but you can see them going on some sites.

Yes but most platforms do not permit it. I only know of one that does and one that will when it has one to trade.

On the Bondora platform you can buy and sell loans that are late or which have already defaulted. You can also buy and sell defaulted loans where the borrower is or will be bankrupt or where the borrower has been convicted of fraudulently obtaining the loan by pretending do be someone else. As buyer and seller you get to decide what premium or discount you want for these loans. Various forms of penalties and extra charges have at least in the past offered the potential for quite large gains after such purchases.

Many platforms have secondary market designs that make it hard to have sensible sales of impaired loans:

1. RateSetter and Zopa merge sales in the normal market. Buyers would get the loans mixed with new loans and unimpaired resold loans. Each has a protection fund that would presumably largely cover the increased risk but neither guarantees that the fund could always cover all losses. So no way to offer a suitable premium or discount based on loan state. At Zopa at least there is very limited ability to select individual loans to sell. Both also have protection funds that reduce the chance of loss due to late payments or defaults for at least some of their loans, reducing the potential value of selling covered loans.

2. MoneyThing, SavingStream and others have secondary markets that only allow selling at par, so it is not possible to offer an appropriate premium or discount to reflect the condition of a loan.

At least one platform has a suitably flexible market to allow it but doesn't:

3. Funding Circle's market allows selling at both premiums and discounts but doesn't allow sale or purchase of impaired loans.

And one has a suitably flexible market and will allow it once it gets such a loan:

4. Ablrate's market allows buying and selling at discounts and premiums and will once that happens but no loan there has yet made an actual late payment or more extensive default. It'll happen eventually, late payments and defaults are an inevitable part of lending.

Of course. Provided the price is in the buyer's opinion appropriate for the risk being taken. Different people will take different views on whether they want to keep or sell such loans, perhaps based on how long the loan has been late, how many payments have been missed or partial or done in many chunks and based on other properties of the borrower and their situation.

At least in the consumer lending sector it's very common for borrowers to be late or even default then repay the loan in full along with all charges. That can be either before or after court action to compel payment or seize property. In the secured business lending sector similar aspects apply to the possibility of legal action to seize and sell loan security or other company assets.

At the moment I have around 100 loan parts at Bondora that have defaulted three or more months ago. My notes on them show that around 38% are currently making non-trivial payments. The majority of those paying are making larger payments each month than original required by their loan agreements, including some who have already paid off all of the capital owed and who are now taking care of accrued interest and charges. The three or more month threshold is there because it typically takes that time and more before there are payments, with a year or more being quite routine, particularly if legal action is needed.

FC likewise.

I do not think that there is a "condition" in the case of savingstream. A loan which goes beyond its original loan keeps on being liquid in SS and keeps on paying the interest. This will change to continuing accruing interest, but it is not a direct comparison to other platforms. In general, you cannot talk about a loan on SS which have gone beyond its initial term as being in default.

Yes, in the one case of default requiring legal recovery PBL7, there was absolutely no difference in how the loan was treated, still fully tradeable on the SM and interest paid as normal but that was under the old T &CS so Lendy was responsible for interest/repayment. Under the new T&CS its a different scenario and at SS/SSSH discretion how a technical default is handled. (What constitutes a default has been the subject of a somewhat acriminious dispute elsewhere and is probably something that platforms should put some effort into educating lenders on)

It's not down to the platforms, HMRC will dictate their definition of default.  The P2P industry has been misusing the term default from the early days, certainly when FC was first conceived the founders equated a default with a loss and all their published material reflected that.  This allowed them to reduce their published default rate as they didn't recognise a default until after an extended period of time during which they tried to rectify the situation and avoid the default altogether.

The correct definition of a defaulted loan is a loan that has breached the terms of its contract, and a default does not have to mean there is or will be a loss.  Probability of default and loss given default are two separate figures that combine to give the expected loss.  It's not really for the P2P industry to repurpose existing definitions just to suit their marketing.