running down or sell?

Selling is relatively time consuming and not the most user friendly process. However, it can be a faster exit for your funds if that's what you're looking for.

If you are looking to maximize the return you'll get, then it's a pretty complex procedure and will require a lot of work. If you're in no hurry though, then feel free to add all Current loans to sales at same mark-up, all overdue loans with some sort of mark-up/discount (this is the trickiest group since it is most likely to have some sort of changes in short timeframes) and defaulted loans with equal discount.

With this approach you will probably sell some loans and the rest will sit on SM until they're cancelled in 30 days or so automatically (or you can remove them earlier yourself if you want to). You can then add them to sales again by reducing the previous price a bit and you'll probably sell some more and then you can repeat the process as many times as it takes.

If you're in a hurry, I'd start at 5% mark-up for current loans, some sort of discount for overdue and a pretty decent discount in double digits (-20..30%ish or so I guess) for defaulted loans and start coming down from there. If you're not in a hurry, you can attempt starting with higher mark-ups/less discounts, but it'll take a lot more times to load off the portfolio.

What your actual returns are, depends totally on what you invested into and when.

My actual return is very high at above 20%, but that's mostly due to old loans where interest rate was not appropriately assigned according to risk, sticking to EST loans only in majority and some more advanced investment techniques that have brought that return. Had I started investing a year ago and/or used the portfolio manager options, I wouldn't even get close to this return.

Defaulted loans bring you very little in terms of the incoming cashflow, as any recovery is usually a long process. So unless you want to sit on your bad loans for full 5 years, sell them first, likely with 20-40% discount. Meanwhile while you are selling your bad loans good loans will bring you interest income that will (partly) cover the losses on bad loans. Bad loans tend to default early, so the longer your loan has stayed current, the less chance of the default. Of course you have to monitor the payment discipline, if it was good before but has become erratic recently, try to sell that loan.  

I think that for the most loans the best strategy is to wait until the loan matures (for Estonian and maybe Finnish loans the recovery is decent, but even with that recovery you will not be made whole 100%, as some people are declared bankrupt, die, commit fraud or have no recoverable assets). For Spanish loans I would sell them now with discount up to 40-50%, if you cannot sell at that price, I would just keep the loan and hope for recovery, Estonian loans I would start selling at 10% discount and go until 30%, Finnish maybe 20-40% is acceptable haircut, if I cannot sell at those discounts, I will wait for recovery. Also consider that average haircut on DCA-assisted recovery is 15-20%, so if you sell with up to 20% discount, it is basically a wash.  Anyhow, you'll be surprised what people buy and sell. I definitely have sold some pretty shitty loans for good price. If you decide to stay long-term on the platform, it is better to reinvest the proceeds, otherwise try to liquidate quickly and move some place else. Your money is better off earning some interest, not waiting for recovery.

Don't sell current loans at par. They will sell with mark-up in most cases. Selling at par would simply mean that you're realizing your loss and eliminating the future positive cashflow since (as mentioned before) the loans that have been performing perfectly for a while, have a lot less likelyhood of default. In other words, if you keep them, they'll help you reduce your losses, but if you sell, then they're worth more than 0% mark-up because they will likely bring in future cashflow.

Please do not do that. Someone would buy them from you then offer them for sale a few minutes later at 5% or higher mark up. Better for you to get the money and it is easy to set all loans to 5% markup, just use the single box above the list of loans you are selling.

You mean that you can then sell the loans at higher price than they should since bondora's UI shows the principal that was collected and paid to DCAs as fees, as still being outstanding and thus price being incorrectly higher due to this fact?

Additionally, if you wait for that 9 months, then:
a) the loan will sell for bigger discount (most buyers of defaulted loans seem to be looking at this information anyway)
b) the time value of money has made the value of that sale even less valuable and in most cases, probably not worth the wait, unless the recovery has been considerable in the meantime on your defaulted loans as a whole.

No, I mean the loans that are priced for the possibility that there might or might not be debt collection then bought just after successful debt collection at a discount to the combined capital and accrued interest and penalties that is far greater than the discount specified at the time the offer to sell was made. That combination of big change in discount and change in loan state from unknown pay state to making some sort of repayment provides the opportunity for sharks to exploit those trying to sell at earlier stages.

You seem to have an incorrect expectation of what will happen sometimes. Today I received a payment of all outstanding capital and some interest and penalties on a loan that defaulted on 2016-02-26. Since all capital was paid that one would have been removed from the secondary market automatically although it is still in debt collection state 1.

I removed most of the defaulted loans I have from the secondary market after the previous event, for a loan that defaulted on 2015-12-12. Now I act in general as I have described in this discussion.

You may also find it interesting that our past discussions of this while you still worked for Bondora were one of the things that caused me to conclude that I could not trust that Bondora would act in a manner that was ethical or that treated customers fairly. It is what finally persuaded me to start to sell many of the loans I had with Bondora. Later events have demonstrated that I was correct to come to that conclusion, notably the decision of Bondora to announce no fees on the secondary market but then continue to charge them anyway for existing offers, without any systematic repayment.

An individual loan may sell at a bigger discount but for some loans there will have been capital and interest/penalties recovery. You will not lose any of that money to secondary market sharks, instead you will keep it all for yourself. As an ethical matter, it is also desirable not to feed sharks.

I would prefer to be able to sell defaulted loans rapidly but the shark risk is too high, so I have now stopped trying to make those earlier sales. The cost of rewarding bad conduct is too high to be worth paying.