Expat Fire has been investing at Mintos for several years now. Read this review to find out everything there is to know about Mintos!
Mintos is a peer to peer lending marketplace, where many loan originators come together and offer their loans to a large amount of investors. Investing in peer to peer lending allows a steady growth of your net worth, assuming everything goes right. Mintos is currently the leading peer to peer lending company in Europe.
The goal of this article is to help newcomers or people that don’t have a lot of time to spend on research. We will help you maximize returns or help you find safer investments.
Presence of employees in peer to peer lending communities.
Actively introducing new features based on community feedback.
No cash drag
Possibility to generate high turn-over when enough time is dedicated to manual investing.
Interest rates have significantly lowered lately.
Complex & overwhelming to start.
In August 2018, Mintos has introduced a new feature where they rate loan originators on the platform. This allows you to quickly identify the risk when investing your capital. We recommend using a weighted diversified portfolio based on these ratings.
This feature was introduced because many of us investors complained about the lack of financial statements being updated on the Mintos website. And obviously, this is a big deal to us investors that want to assess the risk.
On the Loan Originators page, you can see all the loan originators on the Mintos platform, with their corresponding rating. Some loan originators consist of multiple entities, and each entity may have a separate rating, to see these ratings, navigate to the Detailed tab on the Loan Originators page.
Delayed payment: Roughly about 70% to 80% of all loans is being paid on-time, this means that you’re seeing a ~20% drop in returns overall if you’re not receiving delayed interests when a loan is being bought back. Delayed payment means you will receive interest on the last 60 days of the loan when it’s being bought back. It’s counterproductive and can drive a loan originator into the ground at an accelerating pace, but if you feel like every cent matters, then it may allow a more stable and regular cashflow for you.
Penalty: When a borrower is behind schedule on paying back a loan, there is usually a penalty or some additional fees the borrower will have to pay. It would be more than fair if you get a share in it. If you’re not receiving any delayed payments mentioned above, then I would at least look to receive a part of the penalty when a loan runs late. Personally I prefer to ignore loan originators that don’t give a delayed payment or share a part of the penalty.
Grace period: Some loan originators offer a grace period to the borrower to pay back a loan. This is simply because banks are closed over the weekend. So a grace period of up to 3 days should pretty much cover it. Avoid those loan originators with an insanely high grace period. For example, ‘EcoFinance’ is one of those short-term loan originators with a 15-day grace period, you could see a 50% drop in returns just because of this. The grace period should specially taken into account with short-term loans.
Full: The payments are equally distributed towards the end of the term of the loan. There is no balloon payment.
Partial: When buying a used car, this would be for me to be a preferred amortization. With partial amortization, there is a balloon payment in the end, allowing the monthly payments to be lower. This is interesting because, when buying a used car, about 25% of used car buyers end up with unexpected repairs. Then the borrower still has plenty of time to catch up for the balloon payment.
Bullet: The payment schedule is either a single payment at the end of the term or multiple strategically scheduled payments when expecting a large cash flow. For example, a mortgage loan of 12 months with a single payment at the end of the term.
Interest Only: First you receive your interest earned in the monthly payments, and you receive your principal back at the end of the term.
If you plan on investing manually, then car loans is most likely the best way to go. You know the age and gender of the borrower as well as the type of car they are buying. You may for example want to avoid investing in a 20-35 year old buying a BMW 7-series, these borrowers will end up most likely with expensive repairs sooner or later. Look up the MSRP of the car they are buying, the new value of car will most likely represent the repair costs more accurately.
Also don’t forget to look at the fuel type and capacity of the engine. Anything above a 2.0L engine is going to be consuming a lot of gas. Mogo is very transparent about these details.
If possible, try to invest in car loans that have been issued at least 1 or 2 months ago and have had 1 or more successful payments. Most of the time used cars have some problems that need to be fixed after purchasing, which can lead to unexpected costs.
Car depreciation and cost of ownership is region specific.
Generally I would avoid this type of loan altogether. When you look at the bare statistics at Mintos, you can see these type of loans have a lot more late running loans. The reason behind it is most likely that people are more desperate to get a loan, so they are starting to put valuable personal items as collateral.
If you want to have your money available within a 3 month time frame assuming they may run late and are bought back within 60 days, then this loan type is for you. However, there are a lot of late loans here, so if you invest you can check if late fees are being paid by the loan originator when it’s bought back. But I find this counter productive, and only increases the chance of the loan originator defaulting.
Generally you can expect much lower returns. Because of this, I would recommend investing in long-term loans and just selling them if you need the money again. As I mentioned earlier in the article, buying new loans very frequently results in more late loans in your portfolio which could result into higher risk if the loan originator defaults.
Agricultural loans are fairly risky when we start looking at the climate. Make sure to look up the climate of the region and the possible impact of the weather on the agriculture industry in that region.
Having a mortgage loan with an interest rate of 8% or higher is risky. Be sure to invest in mortgages with a lower borrowed amount. However, a default rate of 2-3% isn’t all bad for mortgage loans without a buyback guarantee. And they are secured by collateral after all.
Business Loans & Invoice Financing
I’d recommend taking a look at the finances of the business you are investing in, if available. Sometimes these are backed by collateral.
Paying premium on the secondary market
If you’re paying a premium for a loan on the secondary market, it’s most likely because the primary market is not offering loans with such a high interest rate. There are 2 very important reasons why this is a bad idea:
Remember that loan originators have the right to buy back loans and offer them again on the primary market with a lower rate.
Loans can finish prematurely if the borrower decides to pay back the loan more quickly.
Buying late loans on secondary market & late interest
If you’re buying a loan that is for example 30 days late, that means if there is a delayed payment, you’d be receiving 2 months of interests when the loan is purchased back. That is not true if you buy a loan on the secondary market. You’d be receiving late interests from the point in time where you buy the loan on the secondary market till the buyback date. The rest of the interest goes towards the previous owner.
Double check your auto investment filters before saving
You wouldn’t be the first investors to unintentionally invest in loans without a buyback guarantee or forgetting to add the ‘minus’ to your discount or premium parameter. Double check your auto investment settings before saving and activating it.
How much taxes you have to pay on Mintos, depends on the type of income. I recommend you to consult with an accountant to optimize your strategy for Mintos.
Interest Rates: 30% (Tax Code 1160-04)
Capital Gain: 0% Belgium only has capital gain tax on buying and selling real estate with profit, and pattern day trading.
Campaign Rewards (Cashback): 0%
The ‘Overview’ screen of Mintos is really neat. You can see the summary for each currency in your portfolio.
The ‘Primary Market’ is generally very saturated with a lot of loans as there is a lot of activity on the secondary market on Mintos. At the same time, Mintos keeps introducing new loan originators regularly, and the availability of loans keeps growing in the process. On the left hand side, you can find all the neat filters you can think of.
As for the ‘Secondary Market’ screen, which is basically the same as the ‘Primary Market’ screen but then with the addition of a discount/premium indicator field. This field will tell you whether you are paying a premium for a loan or receiving a discount.
Every peer to peer lending platform should have auto investment options available. Otherwise it can get time consuming to pick the right loans, and then you can just as well jump into the stock market. Luckily Mintos allows very fine control over auto investment presets. You can basically use most of the filters found on the ‘Primary Market’ screen. You can sort your own profiles according to importance.
Once all the filters are set, you can use the sliders to control the minimum and maximum interest rate as well as limit the term. The finer settings are controlled per loan originator, but beware, there are so many options out there, you may simply exhaust yourself changing the filters frequently.
You can choose to reinvest your money at Mintos automatically, this puts your money to work continuously. We get into the diversification settings below.
Below I have configured an auto investment profile on Mintos to equally distribute investments. You can fine tune the percentages yourself and come up with a formula or preference that works for you.
The ‘Account Statement’ page at Mintos is one of my favorites. It’s so incredibly detailed that will make filing taxes fun, when it’s not. You can use the data to create your own reporting.
The ‘My Investments’ page has the same filters you find on the ‘Primary Market’. This is typically the screen you will use to quickly filter and sell loans on the secondary market. You could also use the screen to identify why certain loans are running late and try to find a pattern to change your investment strategy.
The ‘Loan Originators Overview’ page lists all loan originators, excluding their subsidiaries of course. You will most importantly find the rating of the loan originator on this screen as well as the amount of outstanding loans, if you don’t want exposure to smaller and newer loan originators.
If you want to become an expert at investing on Mintos. This is the screen where you want to be. In the ‘Details’ tab, you will find all the necessary information what will happen when a loan will run late or when a loan will be purchased back. Some loan originators don’t pay interests on loans that run late before they are bought back, others do.
When the loan originator goes in financial distress you will find that the group guarantee and investment structure will be of importance to you. The group guarantee will determine if a parent company will help in case of a default. The investment structure determines whether you need to make a claim against the loan originator or borrower to get your money back.
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