No matter if you are a new investor or someone with a little more experience, choosing Mintos loan originators is a painful process. And for good reasons.
When you have 60+ companies, from various countries, with different loan types and with so many other options to choose from is just overwhelming.
I know how it is. I felt that many times in the early days.
It was painful, and it took me a lot of time and many hours of research to figure it out.
But, I’ve made it!
And now I am happy to share all my learnings with you.
Without further due, this post will reveal two things:
The Mintos Helper – an online tool I built to easily find, filter and sort all the loan originators I’m after.
Strategies and a set of rules to take into account when choosing Mintos loan originators to reduce risks and maximize returns.
Alright, let’s get started!
The Mintos Helper
I am happy to introduce to you the Mintos Helper tool.
I built it for myself and now I am making it available to you as well.
What is Mintos Helper?
It’s an online tool to easily select loan originators according to well defined criteria. You can filter and sort them until you end up with a list that suits your wants and needs.
Why Mintos Helper?
As I’m usually a lazy person 😀 I looked for ways to make it much more easier for myself and save me some headaches.
And that’s how I ended up writing a tool, a.k.a The Mintos Helper, to ease my work and give me ability to make better decisions.
Strategies to select loan originators
The Mintos Helper is just a tool. You will need to know what and how to apply filters to get the best out of it.
You need a strategy.
Before moving on, I would like to say that I am strictly referring to either manual investing or Auto Invest on Mintos. Therefore, this post has nothing to do with Invest & Access, where you have little control, and I don’t recommend it. Read more about that here.
In any case, I can see two possible strategies to go with Mintos investing. Let’s review both.
Invest in as many loan originators as possible with the purpose of keeping a low percentage in each one.
If you equally invest in 20 loan originators, you’re going to end up with 5% in each one. Or 3% if you choose around 33 originators. And so on.
The lower the percentage, the better.
In other words, if we assume 3% stake in each loan originator and 12% return per year, it means every 3 months we earn interest to offset the potential failure of one loan originator. That’s 4 loan originators per year.
If you’re interested, you can read more about it on the P2P Millionaire blog.
The downside of this strategy?
Not surprisingly, you end up investing in loan originators that might not be doing great and expose yourself to higher risk.
Considering diversification is overrated, this strategy assumes you will only pick the most solid loan originators, where the risk of default is low.
For that reason you’ll want to focus on investing in top 10% loan originators, according to predefined strict rules.
Essentially you’ll have a bigger exposure on each originator (anything between 10% to 20%), but the risk is somehow offset by choosing the best of the best.
The downside of this?
Obviously, if one of the companies goes bust, you’ll have a significant hit. Recovering 20% of your portfolio will require you around 1.5 years of earned interest.
I would say both.
It’s a fine balance you want to keep between number of loan originators and their quality. That is my goal anyway.
It’s really hard and challenging, but the Mintos Helper tool is making things easier for me.
My rules for choosing Mintos loan originators
We talked about strategy, but that gives us only the general guidelines. We also need a set of well defined rules that will help us choose loan originators.
This is what we are going to discuss on next.
The rules I am going to show you are generally accepted around the P2P community and you’ll probably find other people with very similar rules, with maybe just a few tweaks.
Anyway, before starting I would say to not take everything you read here (or anywhere else) for granted. I encourage you to come up with your own rules that will work best for your risk profile and overall strategy.
Now let’s get to the point.
Rule #1 – have a rating on Mintos from B- to A+
Mintos has a nice rating system that it goes from D (worst rating, default) to A+ (the best one). This makes it very easy for us to compare loan originators.
You can find more details about them, the methodology and so on, on this Mintos page.
My recommendation is to pick loan originators with a rating on Mintos from B- to A+.
I would also advise to avoid the C+, C and C- ones. Those are definitely more riskier and my conclusion is that they are not worth it. There are plenty of others available.
In the past I invested in C+ ones, for the purpose of maximising profits, but slowly changed my mind and decided to make my portfolio a little bit safer.
A good example is Aforti. In March 2019 they were downgraded from B to C+ and looks like now they got in trouble.
This is where the Mintos Helper comes in handy, as is making it very easy to filter out originators with a low rating. Here is a screenshot below.
Rule #2 – a rating above 60 on Explore P2P Lender Ratings
For those who aren’t familiar, the team behind Explore P2P blog is maintaining an independent ratings system for all the loan originators from Mintos.
Before moving on, I want to take this opportunity to say a BIG THANK YOU to them.
I truly appreciate their work and I think is invaluable and a great way to cross check with Mintos own ratings.
Finally, my recommendation is to choose loan originators with a rating above 60.
Moreover, please make sure to check these ratings monthly, as some loan originators can be downgraded if they report bad financial data.
At the same time, some can be upgraded, so you might miss an opportunity here.
Now, someone might ask why I picked 60, and not 50 or 70? And this is a good question.
The answer is simple: this is what works for me now.
In the end, it really depends on everyone’s strategy, and currently this limit just gives me enough loan originators to invest in.
I might increase or decrease it in the future.
I won’t miss this occasion and say that the Mintos Helper tool I built will help you in this case as well. Will be very easy to only select loan originators with a rating above 60, or any other value.
Rule #3 – pay interest for delayed payments
Only select loan originators that pay interest for delayed payments, especially if you invest in short term loans.
In this way you ensure that if the loan goes bust, you will still get interest on those 60 days until the Buyback Guarantee protection executes.
As may have figure out already, this rule is meant to maximize returns.
However, if you want to furthermore diversify, you’re welcome to break the rule.
For example, you can definitely pick a loan originator like Mogo. It doesn’t offer interest on late payments, but otherwise looks great.
I invest in Mogo, but only in secured car loans from Estonia, Moldova and Armenia. Those have a high percentage of current loans and rather a small grace period, so you won’t loose that much interest.
Update August 20, 2019: As one of my readers pointed out, interest on delayed payments matters the most on short term loans, where there is usually a single payment. For long term loans, the impact is not that big, considering the fact that interest is being payed on the delayed principal while the remaining principal is subject to interest in both cases.
All great so far, but how to find those loan originators?
Well, you have two possible ways.
Using the list of loan originators from Mintos, click on the Details tab, and look for Interest income on delayed payments column. Make sure you select loan originators with Yes.
Otherwise, you can also use my tool, Mintos Helper, to easily filter out the loan originators that do not pay interest on delayed payments. See the screenshot below.
Rule #4 – have a small grace period
We need to choose loan originators with a small grace period, of under 5 to 7 days. The higher the grace period, the lower will be your end return.
Why is that?
For loans in grace period you will not receive any sort of interest, although the loan originator is paying interest on delayed payments.
The reason for that is loans in grace period are not technically late, yet. They will eventually become late after grace period ends.
That’s why is important to have a very small grace period.
On another note, I think it would be interesting to calculate the impact the grace period has on the final return.
Anyway, the Mintos Helper will be useful in this case as well, as you can filter out those originators with a high grace period.
Rule #5 – rate of current loans as close as possible to 100%
My recommendation is to invest in loan originators with a rate of current loans as close as possible to 100%.
Well, I guess this is a no brainer, but still good to mention it.
The rate of current loans can be a good indicator of how well the company is doing. For that reason is important to take it into consideration and invest in originators that are doing a good job to keep their loans current.
For me, personally, the cap is at around 75%, avoiding to invest in anything below that.
Take a look below to see how easily you can do this with the Mintos Helper tool.
Rule #6 – loan originators that have a buyback guarantee
There is no point to invest in loans from originators that don’t have buyback guarantee. You will just expose yourself to additional risk for no reason.
I am not saying the Buyback Guarantee is the ultimate protection, as is not. But it has become more like a standard.
In other words, make sure to only pick loan originators that have this enabled.
For that matter, all loan originators included in the Mintos Helper offer this. I didn’t bother to include those that don’t provide buyback guarantee.
Using the Mintos Helper to apply all the rules
Using the Mintos Helper you will be able to apply all the rules described above in a matter of seconds. Is that simple!
All you have to do is to either select a predefined filter which will apply the rules we already talked about, or define your own.
Finally, we will end up with a list of loan originators that we can go deeper and decide if we want to invest in them or not.
Checkout the screenshot below that shows a filtered list of top loan originators.
How to invest in the loan originators of your choice?
I recommend here to use Auto Invest to save time, instead of manual, and define an auto invest strategy for each loan originator.
You can even define multiple strategies per loan originator, depending on your needs.
In this way you can easily prioritize your defined strategies and also disable them in the future, if needed.
Yes, there is a little bit of work in the beginning, but it’s all worth it.
I’ve certainly tried many approaches with Auto Invest, and this one seems to be the best so far.
Finally, just to have a visual reference of what I am talking about, here is below a sample of possible Auto Invest strategies.
You’re not 100% safe
As I am trying to raise awareness around safety of P2P lending in general, I am taking this opportunity to say it one more time.
You’re not 100% safe.
We can take as many precautions as possible, define all sorts of rules, and so on.
But keep in mind that P2P lending is a risky investment, so there is a chance of loosing your money.
You can read more about P2P lending risks here.
Share your opinion
What’s your opinion about the rules and strategies presented in this post?
Would you change something?
What do you think about the Mintos Helper tool?
Do you find it useful?
What ever you think, feel free to leave a comment in the section below.
Until next time,
Disclaimer: This is a personal blog, containing our opinions and views, and nothing you read here can be used as investment advice or recommendation. You should also know that some of the links in this post may be affiliate links, meaning, at no cost to you, I may earn a commission. Read the full disclaimer here.