I had some money in Ratesetter for a while and my brother commented that the return wasn’t high enough to justify the risk – I was making about 3-5%. I’m no expert, I’ve done no research, but my feeling is that the ones that go wrong get more publicity than the ones that go well and so potentially the risk of peer to peer is not so high – providing the company is reputable and they have some form of borrower default guarantee.
I certainly wouldn’t advocate putting 100% of your savings into anything, all your eggs in one basket is probably never a good idea. However, I’m happy to have 10-20% of my money in p2p. Depending on the platform you could also be helping people. I remember when I first heard about micro investing through platforms like Kiva – I was happy to put some money there for no return, because those loans were helping people start businesses and improve their lives. I can’t say that’s happening with Mintos, but you can invest in a wide range of countries so there’s a good possibility that it’s a similar situation for some of the loans.
Who Are Mintos?
Mintos are based in Latvia and they offer peer to peer investing through loan providers – IE Mintos don’t lend anyone money, they are a bridge between the people lending the money and the people looking to lend money. Some loan originators offer a buyback guarantee which means if their customer doesn’t pay, they’ll pay.
I heard about them through The Canny Contractor, who said you could make a return of over 10% so I jumped in with £1200. My first step, and mistake, was to convert all my GBP to EUR and then make investments. Because they’re Latvian, they have significantly more EUR loans than GBP loans so it was my attempt to gain some diversification. I didn’t take into account the currency fluctuation of those returns so quickly decided it was a bad idea. I was charged £6 to convert the money into EUR but supposedly given the interbank exchange rate – I didn’t verify that. If that’s the case, it’s nice clear pricing and I like that, modifying the exchange rate to make a profit on conversions is just sneaky.
Once I decided to get my money back into GBP I had the task of selling all of my existing loans. I put them all up for sale on the ‘secondary market’ (where it’s another investor selling rather than the original loan provider) with no discount and over a month or two I sold about 70%. I then tested putting them up with a discount and sold 80% of the remaining loans within an hour for a 1% discount (I looked at it as a 1% fee to sell my loan which is similar to Ratesetter when you’re on a 5 year loan). This means that getting your money out can be quick or it can be slow, it really depends how much you’re prepared to lose vs how long you’re prepared to wait.
Auto-Investing in GBP
Now my money was transferred back to GBP I took advantage of their auto-invest feature. You can set the account to automatically invest based on your specified criteria – which includes the ability to only invest in loans with a buyback guarantee. The minimum investment amount through auto-invest is £10 so I set mine to invest automatically between £10-20 and only loans with a buyback guarantee. This means as soon as there’s £10 of balance in my account it will automatically be reinvested. Even with only £1200, £10-20 investments mean there are a lot of loans and therefore people repay regularly so it’s great that you can automate the reinvesting of your cash.
My account is showing my net return for EUR to be 10.04% and for GBP to be 12.37%. It’s not entirely clear whether this takes into account the currency conversion costs or the campaign rewards. Some loan originators offer an incentive to invest through them and so far I’ve made more from campaign rewards than interest. You need to enrol in them manually so I do that on all available campaign rewards as I don’t really know who I’m investing through since it’s automated.
The GBP Downside
So, for 10-13% return I’m happy with the risk. Unfortunately in GBP so far they only seem to have 1 loan originator that offers buyback guarantee so all my funds are through one originator which is not ideal. They’re called Mogo and the GBP loans are all vehicle loans based in Poland (no idea how they are issuing GBP loans for vehicles in Poland). There is at least one other GBP loan originator who provides business loans in the UK, but no buyback guarantee.
I could lose my money if Mogo or Mintos go down. Mogos loans are classed as ‘Direct‘ so if they fail, Mintos would take over the management of the loan and I should still get repaid. If Mintos go bust then my deal with Mogos should be intact and the administrators should see that I get repaid. My perception is that it could all go wrong anyway and so I’d much prefer to spread the risk through more than one platform (Mintos) and more than one loan originator (Mogo).
Unfortunately they only have 28 active loan listings in GBP at the moment, 17 through Mogos and 11 through 1pm – the business loan provider. Therefore investing in GBP means that your money will only be spread across 17 loans. However, those loans change so your reinvestments will match against new loans which will get added in the future. For example my £1200 is spread across 63 GBP loans right now. I’m hopeful they’ll add more GBP loan providers soon! I’ve reached out to ask if it’s on the roadmap.
UPDATE: Mintos replied:
Currently we are working to add more loan originators from UK and we also believe that existing ones should add more loans in GBP shortly.
Unfortunately we can’t give you exact time frame as it is loan originator decision when they are going to add them.
I chased for update on approximate timescale and they said:
Upcoming weeks most probably.
UPDATE 2: I hadn’t noticed before, but Mintos have more loans on the secondary market than they do on the primary market. Today (10/05/2018) there are 115k loans on the primary market and 170k on the secondary market. In GBP that’s 18 vs 213, some of which have discounts and quite a few of which have premiums, but the majority are at cost price.
If you want to invest through Mintos you can get an additional 1% of the amount you invest over the first 90 days by using this referral link.
I will also make 1% of the amount you invest over the first 90 days.
I think the returns are enough to justify having some money in Mintos. I like the platform idea – they add new loan providers regularly so the platform is always expanding. It’s disappointing there’s not much range in GBP at the moment, if you are happy to invest in EUR then you’ll have a much wider spread of investments which is very appealing.