When the ISA launches

Since FC have fee-free sell out now, I think it's fine to invest now because if you are happy with the ISA you'd be able to sell out and re-invest in the ISA at no cost (apart from cash drag). You couldn't guarantee that you'd get your old loans back, though, but if you decide that quality has gone down you can opt to keep what you have outside the ISA.

Thanks - that's helpful. The only downside is that if I put it all in now and after £5k has been allocated I decide I do not like the feel of FC and want to pull out, I'd have 2% in each loan. I could sell the good ones but would be stuck with 2% of the bad ones. So I guess the thing to do is to make a decision asap about whether to invest the rest.

The only horror stories I've heard were when investors didn't diversify and put their funds into a handful of self-selected loans...  Now, under new compulsory autobid regime, this is no longer the case. Whether it is 5k or 20k, your funds will be diversified to 0.5%, which means in theory you will get something near their projected return.  I assume selling off will be relatively easy too.

Yes that probably covers it if you read all the words. In summary though if a loan is defaulted, risk band removed, or behind with its payments, you usually can't sell it anyway (and picking such loans to sell specifically is now really hard, thanks to auto-everything being in charge).

Expect to have bits of damaged/dented loans paying you pennies a month for the next forever, with no way of escaping (I've lobbied for a 'give this mess to charity' button, but Fullof Cotton failed to hear my pleas.)

Nope, the pennies come in when/if the defaulted borrower(s) make a payment of some sort .. no fixed schedule (least of all the original repayment schedule!). Yes, you can save them up, and either re-invest or withdraw .. but not until you have accumulated £20 worth, and assuming you are still alive at the time. For most of the loans where I only have a small exposure I'd much rather just walk away, but that isn't an option (same trouble with stocks/shares where I have some ZDP investment trust companies still going through receivership and sending me paperwork to justify the administrator's costs, 10 years after the event).

Given how long the IFISA from FC has been anticipated, I think you should also consider the fact that it might not be available any time soon. If it does eventually appear (and I wouldn't expect to see it this tax year) I'd expect limits on 'new' ISA money only / existing customers only to limit any wall of cash.

You could try an alternative like AC where you can immediately invest in the Quick Access facility which returns 3.75% with essentially instant access (OK, it might take a few tenths of a second, but you can check that at any time).  It also has the benefit of a back-up fund to help protect against defaults.  The AC IFISA is due to be in operation before the year end.  I happen to believe that it will happen as promised.  In contrast, I have zero confidence in FC who seem to allow loans to go way over their repayment date before they even think about chasing things up.  No surprise that my only remaining investments in FC are defaulted loans or others which are overdue by not inconsiderable lengths of time (e.g. 203, 195 and 185 days).  It seems that all a borrower has to tell FC is 'I'll pay it next week...month...whenever' and FC says 'That's fine, it's only our stupid investors money after all!'.  Unlike FC, AC seems to keep you regularly updated on borrower activity and even gives lenders the ;uxury of a  vote on any proposed variation which a borrower might seek.  Rant over!