In this new article I am going to review Mintos and teach you how to get started.
We will understand why is the best platform to start your P2P lending investments. You will learn the basics, but not just that. I will also share tips and tricks from my own experience so you’ll be up to a really good start.
What is Mintos?
Mintos is a global online marketplace for loans. It provides an easy and transparent way to invest in loans originated by a variety of lending companies around the world.
It launched in 2015 and it rapidly become the most appreciated platform, becoming a true leader in the field.
It’s worth mentioning that in 2017 it became profitable, which is a big deal. It’s important that everyone makes money giving investors more peace of mind.
At the moment of writing this, Mintos has over 170.000 investors, 65 loan originators that covers 30 countries and it issued over 3 billion EUR in loans.
The best validation of the popularity and trust the platform is experiencing with investors.
My current situation with Mintos
I invest in Mintos from September 2017, with solid returns and no real problems.
Yes, there were loans with late payments, which eventually defaulted, but that was OK. I only invested in loans with Buyback Guarantee, and I always got my full money back with interest.
The return reported by Mintos is 11.11%, and the one calculated by me is 12.14%. I think the difference comes from the fact that I’ve also included income from cash-back campaigns.
In any case, you can get better returns if you choose loans with longer terms (over 36 months for example, but I’ve tried to keep my loan terms around 12 – 24 – 36 months). Another way is to invest in loans issued by originators with a lower rating – but greater risk.
How Mintos works?
Mintos doesn’t offer loans directly to those who need the money, but rather works like a marketplace for loans. It brings together loan originators with investors all over the world.
The loan originator is a lending company that issues loans to individuals or businesses outside the platform. The risk assessment for each loan is made by the loan originator, and they also set up the interest rate.
The loans are fully funded before reaching on Mintos.
Afterwards, those loans will be listed on the platform and only then we will be able to invest by buying shares (or claims) of a loan. There are no fees when investing on Mintos.
It’s a win-win-win situation. The investors are multiplying their money by gaining interest from loans they invested into. The loan originators gain access to flexible and scalable funding. And Mintos is earning a commission from the loan originators.
What is Buyback Guarantee?
I talked about it in the post on P2P risks and already mentioned it here as well. Let’s understand it a little better.
It’s a promise made by the loan originator that it will return the principal (and sometimes the interest), in 60 days from when the borrower stops making any payments.
This protection is as good and solid as the loan originator is. If the loan originator gets in trouble, there is a high chance it won’t be able to keep the promise and return the money.
I strongly recommend to avoid loans that don’t come with the Buyback Guarantee protection.
The risks are too high and is not worth it. The chance is that you will lose money, as I did on another platform. In a future post I will share that story, as it’s an interesting one, with lots of lessons to be learned.
I mentioned above that only sometimes you will get interest on the 60 days until the Buyback Guarantee protection is executed. This happens because some loan originators have decided to not pay any interest during that period. If you don’t know this, then you will certainly end up with a lower return on your investment.
Only invest in loan originators that offer interest during the 60 days period until the Buyback Guarantee kicks in.
You can find those originators by going here, click on the Details tab, and look for Interest income on delayed payments column. Then make sure it has a value of Yes for the loan originator you’re interested to invest.
That’s really it! You have just considerably increased your chances for a higher return.
Skin in the game
All loan originators are required to keep a percentage (5%, 10%, 15% or even 20%) of their own money invested into each loan, a.k.a skin in the game.
It’s a mechanism to make sure they list high quality loans, otherwise they will also lose money.
Basically, a smart way to ensure that loan originators will not fully offset the risks onto investors. It keeps a good balance, maintaining the health of the marketplace.
Types of loans on Mintos
On Mintos you will be able to find a variety of loan types. At the moment of writing this post we have 8 types – agricultural, business, invoice financing, mortgage, personal, pawnbroking, car and short-term.
I can’t say I like a specific loan type more than other, but I usually have more personal loans. It doesn’t matter that much on Mintos in the end. I prefer spending time to research how solid the loan originators are, rather than picking loan types.
There are two types of loans: secured loans with collateral and unsecured loans without any collateral. The collateral may be real estate in the case of a mortgage loan, a vehicle in the case of a car loan, and so on.
For secured loans, Mintos exposes an LTV (loan-to-value) parameter which can be used to filter out loans. In allows us to only select those loans that have a good collateral, as in theory those are less riskier.
In reality I don’t care that much about LTV. Sure, it’s good to pick loans with a lower LTV but I don’t really feel that it makes a big difference. If the loan is not payed, the Buyback Guarantee should kick in.
As in the case of loan type, I just feel it all boils down to picking the loan originator rather the loan itself.
Is Mintos safe?
Mintos is safe and legit. Is definitely not a scam. In fact, is the biggest P2P lending platform in continental Europe, being very popular among P2P investors.
However, like any other new investment, understanding the risks before investing is very important to have success and not lose your money.
For a detailed explanation of risks when investing in P2P, go here. Otherwise, keep reading for a few simple rules to keep in mind.
4 simple rules to reduce risk on Mintos
Rule #1 – keep the money drag to minimum
Money drag, or the risk of not having your money invested all the time in loans, reducing your overall returns.
On Mintos, this usually happens when you use aggressive Auto Invest strategies. This reduces the chances of finding loans that will match your criteria, so be careful with this.
I will teach you how to mitigate, if not completely eliminate this risk when we will discuss about investment strategies. So keep reading.
Rule #2 – invest only in loans with Buyback Guarantee
This is a no brainer one, and as explained earlier, only invest in loans that offer Buyback Guarantee. There is really no reason to do otherwise. Nothing else to say or do here.
Rule #3 – choose your loan originators wisely
Bankruptcy of the loan originator it’s probably the most important risk.
If the loan originator goes bust then there is a high risk to lose all your money. Not even the Buyback Guarantee will help you here, as the company will simply not have the money to honour it.
It happened once already, with the bankruptcy of Eurocent. Now things are in the usual bankruptcy procedures, and Mintos is trying to get the money back for investors, but it’s a process that will take time.
Reduce this risk by analysing loan originators and understanding how solid they are.
Mintos is doing initial and periodic risk assessments of all loan originators, offering them a rating from A+ to D, on 10 levels. Find them here.
Use these ratings to make informed decisions. Invest only in loans that are matching your level of risk and you feel good about them.
Additionally, also use these independent ratings found on Explore P2P blog.
And, finally, let’s not forget about diversification on as many originators as possible. This will ensure to reduce the impact on your portfolio if one really gets in trouble.
Rule #4 – don’t invest all your money in Mintos
Diversification is key and plays an important role in P2P lending. My advice is to spread your money across multiple P2P platforms. Additionally, limit the share of P2P lending in your total investment portfolio.
How to open a Mintos account?
Opening an account on Mintos it’s easy and would not take you more than 5 minutes.
After registration you also need to verify your identity in order to be able to withdraw your money. This is an EU anti-money laundry requirement, so unfortunately you can’t skip it. But it’s easy enough, so I don’t think you’ll have problems.
Is good to know that UK residents can’t open a Mintos account anymore. We shall see if this will change in the future.
Sign up bonus
Create a Mintos account using the button below and get 0.5% bonus for all investments made in the first 90 days. This is an affiliate link and it will be an easy way for you to support this blog.
Yes, I will make money too! It’s a classic win-win situation.
This is an affiliate link and will be an easy way for you to support the maintenance of this blog.
How to invest in Mintos?
Transferring money to Mintos using Revolut
The first step you need to do is to transfer money to your Mintos account. I recommend starting with small amounts, until you get used to it.
Primary and secondary markets
On Mintos you will find two markets.
A primary market – the most important – which will allow you to buy new loans.
And a secondary market, where you can sell loans you purchased from the primary market.
You can sell with a premium, on par, or why not, even with a discount, depending on your goal. Is actually the best way for a quick exit. In fact I invite you to read this story from the P2P Millionaire blog. The author sold 791.000 EUR worth of loans within 24 hours! Now that’s an awesome secondary market.
Otherwise, you will trade on this market to make a quick profit, using strategies aimed at maximising your returns on Mintos. But this will be a discussion for another time.
You can invest in both markets manually, or automatically using Invest & Access or Auto Invest.
For a beginner I recommend that you start with the primary market and use Invest & Access.
At the same time, I recommend doing some manual investments as well.
The point is for you to get hands down and just understand the whole thing better, while Invest & Access is already generating good returns. You’ll understand how a loan works, what happens when it goes late, grace periods, and so on.
Manual investments do that.
Once you have a strong level of confidence you can also jump and experiment with Auto Invest. The purpose of using Auto Invest is to consolidate your portfolio and maximize returns.
You will end up not using Invest & Access anymore, or using it along with Auto Invest.
Manual investments on Mintos
I won’t say much here, as I would rather have you go and play around on Mintos and try to figure out on your own. It’s pretty simple and that’s the best way to learn. I will however give you a quick start with a self-explanatory screenshot.
Automatic investments with Mintos Invest & Access
Invest & Access is the new, fully automated and most simple way to invest with Mintos and withdraw money when you need them.
To learn more, I made an in-depth review that you can read it here.
Automatic investments with Auto Invest tool and how to configure it
Auto Invest is a function that will allow you to define automated investment strategies based on well defined criteria. It has tons of settings so it can be configured whatever way you like it.
When you will create your first investment strategy, it will ask you the type. You can choose between a predefined one with preset values where you have little control or a custom one.
Always choose a custom strategy!
I have seen people choosing the predefined strategy and then wondering why they have low returns. And I won’t even mention the risks. Don’t do the same mistake and be willing to invest a little extra time for maximum benefits.
You will be much better if you use Invest & Access rather than a predefined strategy of Auto Invest.
Assuming you went with a custom strategy, let’s take a quick look at available settings and understand them better:
- Loan Originators – we will want to only choose the originators that match our risk profile;
- Rating – each loan originator comes with a rating so pick the ones with your desired ratings;
- Interest and Duration – you can set the desired interest and loan duration interval – pretty important; for example you won’t want to invest in loans that have an interest rate of 9% or lower;
- Loan Type – pick only the loan types you like the most; for me it doesn’t matter that much, so I invest in all;
- Country of Origin – the country where the loan was issued; if you think some of the countries are too risky for you, then it’s very easy to eliminate them;
- Buyback Guarantee – will allow us to choose only those loans that have this protection enabled; really important to have this on to not make the mistake of investing in loans without it;
- Investment in One Loan – another important setting; I always choose to invest the minimum amount allowed of 10 EUR in one loan just to minimise the risk;
- Portfolio Size – it refers to how much money to allocate for this specific strategy; later on I will explain how I use this;
- Include loans already invested in – usually is best to select No; in this way you limit your exposure on a single loan to just 10 EUR;
- Do you want to reinvest? – you need to make sure you have selected Yes, otherwise all the money you’ve earned from existing loans won’t be reinvested; you’ll miss the great power of compound interest and hit the “money drag” problem that will lower your returns considerably;
- Diversify across loan originators
Next, I will like to talk about a very important limitation (or feature?) of Auto Invest. As you will see, it has a big impact in the way we are going to set it up.
Auto Invest will not prioritise loans with the highest interest. Avoid this problem by using multiple strategies and setting up priorities of execution.
For example, first strategy can target only loans with 14% interest, second with 13% and the last one with 12%. Auto Invest will execute these 3 strategies in the order of priorities you have defined upfront. First, will try to find loans with 14% interest, and if not available moving on to 13%, and so on. It will do this until all money were invested or there are no more loans available, which ever is first.
My current Auto Invest strategies
When talking about my own strategies, they are very flexible and I’m adapting them all the time. I will show you my current strategies that have worked great for me so far. They are perfect for beginners, and will provide you the best returns while keeping risks under control.
Update August 17, 2019: I am now using new strategies on Auto Invest. I still kept the old strategies here just in case someone finds those more useful. Not everything that works for me will work for you as well.
I now use 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.
The principle behind this approach is very simple. It has two parts.
Try to invest in as many loan originators as possible to keep a low percentage in each one.
Let me explain.
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 catch of this approach?
Ending up investing in loan originators that might not be doing great and expose yourself to higher risk.
That’s were the second part comes in.
Don’t just blindly invest in any loan originator on the market. Hand pick them according to well defined rules, that I am going to show you later in the post.
Finally, just to have a visual reference of what I am talking about, here is a screenshot below.
In the past I was using 4 strategies. And because a picture is worth 1000 words, I will start with a screenshot.
They are very simple, and easy to understand and will execute in the order of priorities. First will go the one with 13% or more and last the Fallback strategy.
The 13% or more is aimed to maximise my returns while still keeping risks under control. That means I only chose to invest in high profile loan originators, that have a good track. Another important thing to mention is the amount of money allowed to be invested using this strategy. I’m limiting it to half of my capital invested with Mintos. As I’m taking more risk, is a good idea to not go all in with this strategy.
The 12% or more and 11% or more are self explanatory, so I will skip directly to talk about Fallback strategy.
Is the last one to be executed in the order of priorities and I have only created it to dramatically reduce the risk of money drag. If, by any means, there are no loans in the market available for the first 3 strategies then this one ensures that my money will be invested 100%.
I do this by choosing a really low interest rate of only 9%, but at the same time limiting the duration of the loans to 12 months.
You would say that the return is not great, but that’s okay.
I will teach you a trick.
You can always sell these loans on the secondary market freeing up the money for another chance to buy higher interest loans later on. Smart, right?
My rules for choosing loan originators
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.
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.
One more thing to say before starting.
Now let’s get to the point.
Rule #1 – have a rating on Mintos from B- to A+
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.
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.
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.
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.
If you want to learn more about Mintos loan originators read this dedicated post.
As this has become a very big post already, we will end up here.
In conclusion, Mintos is a platform that should be in every peer-to-peer lending portfolio, offering investors amazing diversification and great returns.
Let’s not forget Auto Invest, which is making things so much easier.
I am really happy with the platform, and I will keep using it.
Share your opinion
Are you already on Mintos? If so, please share your thoughts in the comments section below.
Are you satisfied with the returns so far?
Do you diversify as much as possible, or do you prefer to invest in a few loan originators?
How much of your money would you be willing to invest into a P2P platform like this?
What ever you think, feel free to leave a comment in the section below or vote.
Until next time,
P.S. In the next post we will discuss about another platform, one of my favourites, where I have the most money in. Stay tuned!
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.