P2P investors are quite bananas about Mintos. When you read the web, Mintos to me seems to be the most loved P2P lending platform. What originally made Mintos different (since, others with a similar operational model have entered the market) were:
- It's a loan brokerer: it refinances already issued loans and doesn't organize the loan itself
- The loans on Mintos are often significantly funded by the loan originator as well, making it a mutual interest for the loan to be successful. There is 'skin in the game' so to speak.
- Buyback guarantees are there to reduce the volatility of your investments: if the borrower can't pay back, buyback guaranteed loans will be purchased by the loan originator including interest.
So there's no risk, right? Not exactly. Past performance is not a guarantee of future.
Mintos risks
Case Eurocent
Back in March 2017, a loan originator called Eurocent joined the Mintos P2P marketplace to provide loans in Poland. Only three months later, Mintos had to suspend Eurocent loans on its marketplace, since the loan originator had missed payments. Nine months later in March 2018, Eurocent ceased its operations, with not all loans paid back to investors on Mintos.So what happened?
Mintos has a wide range of loan originators, some better than others. While it might feel like it's Mintos guaranteeing the loan, it's actually the loan originator. Keep this in mind. Would you feel comfortable with Eurocent backing your loans? Many investors did, without thinking too much about it. And the buyback guarantee failed.
Eurocent is a wonderful example of counterparty risk. Sometimes we talk about platform risk, and it might be a little inaccurate in the case of Mintos being a broker, not the loan originator, yet it is the same thing. When someone says they will give you 12% interest guaranteed, you should think "How can I lose money with this?". Think of platform / counterparty risk. That's most likely how it will materialize.
So Eurocent had passed through Mintos' filters to the Mintos marketplace, and Mintos passed the risk to the investors. How does buyback guarantee sound like now?
Loan originators
Since Mintos doesn't provide the buyback guarantee, Mintos doesn't carry the credit risk. The loan originator does. If the economic environment takes a turn for the worse, it will hurt the loan originators first.
The loan originators compete against each other. Investors flock to higher interest and since loan originators often provide buyback guarantees, investors behave as if the interest is the only thing that matters. What the loan originator can do to affect their own margins is have a spectacular risk model. That is their competitive advantage.
From an investor's point of view the breaking point is when a loan originator becomes insolvent. If you can avoid those cases, it should have an impact on your bottom line.
Since Eurocent, Mintos has put better deals in place with its loan originators and Mintos investors have priority in debt collection. Also, since it has happened once, Mintos is getting more careful with its loan originators, hopefully leading to higher quality in loan originators. There's also a great resource over at p2pexplorer that scores all the Mintos P2P loan originators in an attempt to avoid rotten ones.
The loan originators compete against each other. Investors flock to higher interest and since loan originators often provide buyback guarantees, investors behave as if the interest is the only thing that matters. What the loan originator can do to affect their own margins is have a spectacular risk model. That is their competitive advantage.
From an investor's point of view the breaking point is when a loan originator becomes insolvent. If you can avoid those cases, it should have an impact on your bottom line.
Since Eurocent, Mintos has put better deals in place with its loan originators and Mintos investors have priority in debt collection. Also, since it has happened once, Mintos is getting more careful with its loan originators, hopefully leading to higher quality in loan originators. There's also a great resource over at p2pexplorer that scores all the Mintos P2P loan originators in an attempt to avoid rotten ones.
In its auto invest configurations, Mintos allows you to balance your investments evenly across the loan originators in your portfolio. Doing this ensures that you won't expose yourself to the loan originators in the proportion of their loan volumes. You should still be conscious about which loan originators to lend money to, but Mintos does make it fairly simple to diversify: if one goes down, it shouldn't be a catastrophe.
There are no free lunches. Someone always carries the risk. With buyback guaranteed loans, the loan originator carries the risk, until it becomes too much and the loan originator collapses. So what does this mean for the investor on Mintos? It means that:
- The borrower always pays a much greater interest than what the investor gets. Mintos and the loan originator will take their own premiums.
- The loan originator strives to set the interest so, that losses are covered on top of all other expenses such as salaries etc. This means that in order to win, you need to have a great risk model and a lean cost structure. If your risk model doesn't work, the realised losses will drive you out of business. If your cost structure is too fat, you won't be able to attract investors.
- Mathematically, the investor might potentially carry an equal risk to non-buyback platforms, but the risks simply realize with a different mechanism. Of course, with a platform such as Mintos, it is more convenient to diversify, effectively reducing volatility of the portfolio.
To be clear, Mintos does not provide the buyback guarantee, but instead the loan originator. When investing in buyback guaranteed loans on Mintos, it is the financial stability of the loan originator you must evaluate, not Mintos'.
How to use Mintos
The best way to get a good understanding of Mintos is through a usage video. Here's one in from Marco Schwartz that displays all the important interfaces.
Auto invest strategies
Mintos has always offered an auto investing tool that lets you pick and choose the kind of loans you want to invest in. This feature is so powerful it might also feel a little complicated. If you feel like that, it's best to take a breather and ensure you know what you're doing. Here's a checklist:- Do you want to invest in non-buyback guarantee loans? They usually have higher interest, but you carry more risk.
- Certain loan types suggest there is collateral, for example mortgage, pawnbroking or car loans. In case you don't have buyback guarantees, collateral is more important.
- Loan originator rating is Mintos' own, but pretty good way of gauging loan originator risk. This is especially important when financing loans without collateral, e.g. personal loans.
- Country is a difficult filter, but as a rule of thumb, the better debt collection processes work in a country, the easier it is for loan businesses.
- Mogo is a HUGE loan originator on Mintos, almost 17%. One of my strategies is Mogo-only, so I can better control how much Mogo-exposure I want.
- One auto-investment strategy I use focuses on short-term loans with slightly lower interest rates and very short loan durations. Buyback guaranteed and B and above loan originators, excluding the most exotic countries.
- One strategy is all collateral loans excluding Mogo, again B and above, 11% with buyback guarantees and up to a couple of years loan duration.
- One strategy is a "Diversification strategy" proposed by Mintos that I got some cashback for.
Invest & Access
In 2019 Mintos introduced Invest & Access, which makes life extremely simple. It's basically a fully automatic investment manager that reduces all decisions you need to make to zero.
When you enable it, you simply decide how large you want that portfolio to be. Capital goes first to your Invest & Access portfolio before your auto invest strategies.
Invest & Access always has full buyback guarantees protecting you and while you see exactly the interest of your portfolio and the average term of loans in it, you can cash out when ever.
The biggest downside of Invest & Access to me is not being able to choose loan originators. In the unlikely case when a loan originator goes bust, you could be affected through Invest & Access. This isn't a huge deal, since the exposure is likely extremely narrow and should have marginal impact on overall performance.
Before Invest & Access, it was easier to cherry-pick great loan originators with good interest. Now, since Invest & Access takes precedence over Auto Invest, to invest only in great loan originators, you'll need to forfeit some interest.
Before Invest & Access, it was easier to cherry-pick great loan originators with good interest. Now, since Invest & Access takes precedence over Auto Invest, to invest only in great loan originators, you'll need to forfeit some interest.
Why Mintos is a great platform
There are plenty of reasons to love Mintos. For me, Mintos is a backbone of my P2P portfolio. Here's why:
- There are always a great variety of loans available. Sure the interest rates vary and you might not always get 12%, but there's always something to choose from.
- There are great many loan originators from many different countries. Diversifying both geographically and by loan originator is very simple.
- By investing in buyback guaranteed loans you can reduce the volatility of your portfolio - just try to avoid loan originators that would go bankrupt.
- Returns are highly predictable and with 11% returns I'd say very high, too.
- There is a possibility to invest in short-term loans as well, which doesn't tie up your capital for as long. Interest rates are usually a bit lower, but from a liquidity point of view, this is a plus.
- The secondary market is superb. In a normal market, selling your loans isn't a problem at all.
For these reasons, my Mintos P2P portfolio has increased month by month and is at the time of writing over 22,500 €.
Although campaign rewards are almost 10% of my returns, I don't honestly even remember what they are! π There's always something going on on Mintos that they give you extra interest or cashback for. I try to take advantage of that, which seems to be working!
Here's what my monthly revenue on Mintos looks like:
Mintos is definitely in it's own class in many ways: diversifying is easy, interest rates are generous, loan volumes high, the buyback guarantee works and there's even the highly liquid secondary market. For these reasons, Mintos gets a full five stars from me ⭐⭐⭐⭐⭐ and continues to be an undisputed backbone of my P2P portfolio.
Looking to invest through Mintos? Know this:
- By registering now through my affiliate link, you'll get 1% additional interest for the first 90 days. Best to take full advantage of that!
- With the Auto Invest feature, you can easily limit your portfolio to only buyback guaranteed loans, to specific loan originators and to specific countries.
- You can use the tool at explorep2p.com to choose only the loan originators you feel comfortable with.
Other articles you might like:
- My monthly updates on how I make over 2,000€/mo in passive income (at the time of writing)
- My Bondora review and why it's good not everyone has a buyback guarantee.
- My Robocash review - a very hands-off peer lending platform with a steady 12% buyback guarandeed income
- If even higher interest rates appeal to you (with higher risk), then check out my Envestio review for buyback guaranteed business loans that has yielded 21% so far.
Are there other platforms out there similar to Mintos? Let me know in the comments ππ»
