THE TIME it takes to fund and exit loans on the secondary market varies considerably across peer-to-peer lenders, research by Peer2Peer Finance News has found.
Lenders claim secondary markets enhance liquidity for investors, but on some platforms it can take up to a week to sell on loans and withdraw money.
At Zopa, for example, it takes an average of 1.5 days for investments to be deployed and 4.4 days to withdraw funds. Lending Works said it typically takes less than a week to deploy investments, while requests to exit money “occur instantly”.
At Landbay, loan parts are typically sold within a few days. “Our secondary market is very liquid, however the sale of a loan is subject to new investment inflows being available which we cannot guarantee,” said Landbay chief executive John Goodall.
Read more: RateSetter streamlines secondary market fees
RateSetter claimed its secondary market operates the fastest, with money matched within a day and 99 per cent of requests to take money out processed within 24 hours.
Mario Lupori, chief product officer at RateSetter, said this is because the platform spreads risk by using a provision fund, which offers the same level of protection to lenders irrespective of which, and how many, borrowers they are matched to.
“Other platforms protect lenders by spreading risk across individual loans,” he said. “If someone wants to invest, say, £100,000, they have to wait for 10,000 customers to come onto the platform and for £10 to be matched with each one.”
A Zopa spokesperson said its method of splitting investors’ money into chunks and matching it across multiple borrowers provides a level of diversification “unrivalled by other P2P platforms”.
This article featured in the August edition of Peer2Peer Finance News, which is now available to read online.