Funding Circle has announced it is changing the way investors sell off unwanted loans in a bid to speed up waiting times to cash out.

The peer-to-peer lender has been criticised by customers who have faced waits of several months to cash out their holdings.

Currently, investors are able to access their funds in two ways: By “switching off lending” and by listing part loans for sale.

Businesses pay back interest and principal each month, so when an investors switches lending off, they will receive approximately 3 to 5 per cent of their outstanding portfolio after the first month and about 30 to 40 per cent of their money back after 12 months.

Alternatively, Funding Circle’s selling tool matches investors looking to sell loan parts with investors looking to buy. However, this is subject to demand from other investors and selling is not guaranteed.

The Press Association reported in September that the average amount of time taken to re-sell loans ballooned from about eight days in January to an average of 93 days by the end of August.

New re-selling tool

Funding Circle is launching a new selling tool on 2 December that it claims will improve investors’ ability to access funds more regularly.

Currently, loan parts are sold on a first-come, first-served basis and investors wait until they reach the top of the queue before selling any. But the new tool will cycle through all investors wishing to sell loan parts as many times as possible within a 120-day period. This will mean investors start to receive money back more regularly from the loan parts that have sold.

Funding Circle will also introduce a transfer payment for those wishing to sell loan parts to other investors. When a loan part is sold, a 1.25 per cent transfer payment will be applied. For example where a seller sells a £20 loan part, they would receive £19.75 from the buyer.

Funding Circle says this will boost returns for investors that buy both new loan parts and loan parts listed for sale on the secondary market.

It also says the new tool will make it easier to change the amount investors want to withdraw after they have started selling. They will be able to see the amount received from loan part sales as well as the amount received from repayments, so they don’t withdraw more than initially requested.

All investors currently selling loans will be automatically transferred over to the new selling tool on 2 December.