Mintos investment structures explained
Last month, Mintos introduced a new filter, direct investment structure and indirect investment structure. This is very important in case the loan originator goes bankrupt.
The tool tip on the filter ‘Investment Structure’ reads:
“The direct structure is when you are buying a claim against the borrower. The indirect structure means you are buying a claim from the loan originator. Therefore, the repayment is backed by the borrower’s repayment”
What we know thus far is, that the buyback guarantee on Mintos only is honored is the loan originator doesn’t go bankrupt. There are buyback guaranteed loans for both the direct and indirect investment structures. But what happens if the loan originator goes bankrupt?
Let’s get this straight. So the direct investment structure means that you’re buying a claim against the borrower. This means that if the loan originator goes bankrupt, you still have a claim against the borrower to get your money back. But if you have made 10 EUR investments in every loan, this can become quite a hassle. You may have to go after every single borrower that is defaulting, going to court over 10 EUR. However, chances of recovering money is still higher than with the indirect investment structure, read further below.
Whereas with the indirect investment structure, you’re buying a claim against the loan originator. If the loan originator goes bankrupt, then they can’t honor a buyback guarantee obviously, and then you have to put a claim against the loan originator if the loan defaults, not the borrower. If you have 50 defaulting notes with the same bankrupt loan originator, there is basically a 50-50% chance you will get your money back. That is, if they don’t decide to give only a part of your money back, because after all they are in dept and already have no money left. Get the gist?
However, do beware of the buyback campaigns Mintos has started with in December 2017. Now in January 2018, we’ve seen loan originator specific buyback campaigns, which should worry you, specially when there is the indirect investment structure involved.
However, as usual, when investing do make sure to investigate each loan originator carefully, as your buyback guarantee does need to be honored by the loan originator. It is hard to say if the statistics are accurate for the defaulting loans on Mintos as loan originators have the right to buy back loans early, they could technically hide defaulting loans because it will look to us like they have been paid off.
This means basically that differences will start to show when the loan originator goes bankrupt. Which one is best is hard to tell. Both situations have advantages and disadvantages.
Read our complete Mintos review here.
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So basically it is always better to invest in Buyback combined with direct Investment right? Rather than Buyback + indirect. Buyback is save until the bankruptcy of the loan originator and then there are better chances to get money from the borrower than from a bankrupt loan originator… Did i
miss something? 🙂
If I understand it correctly, with direct investment structures, you have a claim against the borrower. So if the loan originator goes bankrupt, you have to contact each borrower individually to get your money back. This could be a hassle for 10 EUR investments or equivalent minimums.
But with the indirect investment structures, you have a claim against the loan originator. So you only have to put a claim against one, it may be less time consuming to get your money back. However, chance to get your money back is most likely lower too.
I am not sure yet or have no confirmation of what I will be saying next, but I suppose that with the indirect investment structure, I am not even sure if you continue to get paid if the loan originator goes bankrupt. I suppose with a direct investment structure you do.
If you want, I can try to ask my contact at Mintos to be sure.
Yes please 🙂 I have received the information from Mintos that in case of an indirect investment + insolvent originator you *maybe* would have the advantage that the safty diposit of the orinator jumps in and you will get payed. This isnt the case if you invest directly. But they also said, that they have a lack of expirience..hmm.. Anyway, that would mean (other than I thougth before), indirect is more favourable ^^
Oh, I see. In that case, they will most likely distribute the safety deposit among investors rather than a complete refund or buyback! But you will most likely have to wait till they have done the debt collection.
But in any case, keep subscribing. I’m analyzing the loan performance by comparing current to late loans. I’m thinking of adding early finishing loans and comparing them with normal finished and defaults to my other reports. That was we can discover issues with a loan originator on time, before their financials are being posted online.