The last quarter of the year is mostly the best for invstors, as the marketplaces try to attract as much new money as possible to close to year on a nice run. Therefor they offer some really nice deals (cashback, bonus etc) to investors. Flender kicked it off earlier and Mintos goes much further. Plus, new investors can take advantage of the regular 1% cashback on top.
Mintos offers up to 5% cashback until 31st of December (applicable only primary market invstments). The cashback level is related to the duration of the investment. In below chart you can see for which duration you get what cashback. There are two requirement which must be met to participate: 1) You need a Mintos account (if you don’t already have one, use this link to register and get 1% additional cashback during your first 90 days with Mintos). 2) You need to enroll to the program, click on enroll in your Mintos account. That’s it, you will get your cashback within 6 working days after your investment. I checked the terms and conditions, you are free to sell your investment at any time. Even if your loan gets bought back the next day, the cashback belongs to you.
Why does Mintos offer such cashbacks?
I assume there are at least two reasons. The obvious: They would like to attract as much new money as possible by the year’s end. Second they try to convince investors into longer duration investments. I suspected that already when they decided to waive to secondary market fee back in November. At the moment you can get up to 14.7% payday loans from Mozipo with a duration which allows you to get additional 2 to 3 percent cashback on top. As the paydays naturally have high delayed quotas, I assume the bigger part will be bought back prematurely to their maturation date. Right now you can find about 23.5k loans matching these criterias: >24 months & buyback. Just invest as much as you are ready to bind longer as there is no guarantee for liquidity. There are always risks involved, even with buyback as the Eurocent case demonstrates. So be selective about your loan originators. If you haven’t an account yet, now is the time to get one and receive additional 1% cashback for your first 3 months of investing with Mintos.
Frankly speaking, I was a bit surprised by Mintos’ accouncement that from now on non-bank car loan lender Mogo offers loans in Pound Sterling. The reason for my surprise is the timing for this move. On twino and on some other European p2p marketplaces GBP loans are already offered for some months now. Given the UK’s history with p2p and the general openness of its investors I had anticipated this move much sooner (or Mintos were reluctant because of Brexit or so)… Whatever, this presents an opportunity for UK investors (and all who like to invest in GBP equally) to invest in high yielding car loans, without currency risk.
What to expect?
Mogo offers Polish car loans with a duration of 6 to 48 months with yields from 8.5 to 13 percent. The loans are equipped with a buyback freature which means that if a loan is overdue for more then 60 days, the loan will be bought back and the investors will receive all outstanding capital plus accrued interest. I expect that once the demand is there other regions and loan originators will follow to issue loans in GBP. How to add GBP?
Mintos has an UK bank account with own sort code and account number with transferwise. You can therefor just make a local ebanking wirement which should arrive in minutes. The other possibility is to exchange foreign funds directly at Mintos.
Who is Mogo?
Mogo is a profitable car loan lender from the baltics which operates now all over Europe. Their loans have a low default rate of about 2 percent (according to Mogo). One interesting fact is, that Mogo shares the same adress with Mintos in Riga, Latvia. They are not listed as a related party according to IAS 24, but I guess they are related to some extent. I have made this suggestion with my last post, and Mintos so far has not confirmed or objected ties.
If you want to join Mintos now, use this link for registration (link leads you to Mintos.com and then you register) as you will get 1% cashback on your average investment over the first 90 days. The bonus shall be paid every 30 days directly to your investment account. I have put together lots of post on Mintos during the last months, you can read them from here.
Ok, the subject is not that accurate as Mintos is not a real p2p marketplace in the classic sense, as there already funded loans are securitized and sold to investors. I was a little upset with Mintos beginning this year aus the rules often changed (interest rates up/down, foreign curriencies etc).It is not that this situation would not persist to today, but it has its advantages.
Mintos offers the broadest loan supply
As other platforms like Viainvest, Swaper and Robocash serve (mostly) as financing platforms for their respective loan originators, Mintos is some steps ahead.. At Mintos there are several unrelated loan originators on bord which use the platform as funding source. This opens a lot of possibilities for investors to invest broadly. It is clear that at some point problems occur with a loan originator, as the eurocent case shows us. As I wrote before, I believe that this case is good for us (except for the investors who lose money though) and strengthens Mintos’ business model and helps the platform to further develop. It would be a misbelief that this is the only time a loan originator struggles. This is valid for all platforms, not only Mintos. So do not back everything on the wrong horse, diversify!
Mintos related loan originators (Mogo, Lendo etc)
Here you find an overview of Mintos Originators, for further information, click on their logo. Even though Mogo is not considered as a related party according to IAS 24 (which doesn’t mean it isn’t related, might be different under other accounting standards), I still think it is possible that it is somehow related to Mintos. Mintos and Mogo share the same physical adress with their headquarters for example. Lendo ist the Georgian subsidiary of Banknote, the Latvian payday loan originator (related to Mintos). Even if such structures have been critisized before, this doesn’t deter me. Free market economy has a lot of examples of related enterprises. The only disadvantage I see is that if one party has control over the other party a domino effect could take place in case of problems with one party (accounting tricks etc). This is just hypothetically thinking. If we hit a recession, then the whole economy is involved anyway and one firm pulls down the other (ok, in the case of related firms, this could of course be more drastic and take place quicker, but the principle is the same). From this point of view I have no problem with Mintos’ structure. I always believe that the entrepreneurs want to make profit and not to be involved in “criminal activities”. Of course a can’t exclude such motivation completely (but it should be clear to any investor that such high yields come with high risks). At least Mintos is operational for more than 1000 days, so I guess the business model is succesful. I do hope that Mintos has a deep insight knowledge about their related originators and tries to avoid a default there as this would hit the company double. 😉
There are nice yields available at the moment
Last week I invested in Lendo payday loans which yielded at 13.5% (Euro not Lari of course) and have a duration of 24 to 36 months which seems rather unusual. I can only remeber to have seen durations of up to 12 months before. I don’t care about the longer duration as I expect most loans not to reach maturity anyway. The buyback comes in play much earlier as down the road most loans will redeem early, amend the contract or just don’t pay up. In this case they are bought back prematurely. This leads to much shorter duration of these loans then at the point of issuance. I estimate that more then 90% of these loans won’t reach the set maturity. I cannot prove this number, it is only a estimate. How do I get to this number? When I check my buyback quotas of the shorter loans I see a buyback rate of about 50%, given the longer duration, I guesstimate that the buyback figure will be significantly higher.
Bargaining is getting tougher on the secondary market
Someday in the past I had nearly reached 20% yield (NAR not XIRR) with Mintos, due to nice transactions on the secondary market. Right now I have fallen back which comes from 2 reasons. Firstly I was not able to sell everything like I wanted and used to and secondly there is a lot more competition on the market. In the beginning I was able to manually grab some snaps, but that got a lot harder as since some weeks some IT guys created their bots to do the heavy lifting. Sadly I am not able to write a bot myself, so I have to rely on some luck. Consequently this means that my yield will be somewhere around 14 and 15 percent, which is still a great return. If you would like to start with Mintos, use this link to register and get 1% cashback on your average investments during the first 3 months.
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I mentioned it already sometimes that Eurocent, a Mintos loan originator has to deal with serious liquidity issues. The loans are still being bought back, but without respecting the 60 days buyback rule. So there is money going back to investors pockets, but we do not know how much this will be in the end. I guess that not every cent will be returned, a damage will occur. If Mintos jumps in as savior? I have my doubts about that. This incident is important for the platform and us, I will lay out my arguments in the following post why this is the case.
What has happened?
Some months after Eurocent joined Mintos, some reports about payment issues have arisen and therefor the placement of new Eurocent loans on the platform has been suspended. Further the trading of existing loans on the secondary market was set out. According to a statement from Mintos the reason for the liquidity issues are due to a missing refinanceing of a bond. And exactly this circumstance was not foreseeable for Mintos (before Eurocent was granted access to the platform) when they fullfilled their due diligence on Eurocent. Seemingly at that point in time there was no reason for doubt that the bond will be refinanced. Even if that was the case, this really shows to us that the loan originators are not very well capitalized und some events can quickly lead to liquidity issues.
Why is this good for us and Mintos? 3 reasons:
1) The buyback guarantee is not sacrosanct:
Taking Eurocent as an example (I already said that repeatidly), we can see that the buyback guarantee is only worth as much as the loan originator is capable of payingt.
2) Diversification is important and appropriate even with buyback in play:
With Mintos we have likely the biggest choice of loan originators (in Europe at least), from whihch we can buy loans. Therefor we can distribute our money between a lot of originators and absorb some Eurocent style shock.
3) Mintos will have a (much) closer look:
Mintos already announced that measures have been taken that such an Eurocent occurence does not happen again. I find this a little bit special due to the fact, that they already told us that this event was unforeseeable. The question might be allowed how can they take measures for something that is not foreseeable? I admit, this rhetoric question is a bit mean, but justified. In this case they already now what went wrong and they can adapt. But they won’t be able to be prepared for any possibilty, but this leads to the point I try to make: It is always possible that something happens, with every investment there is risk. Finally this incident should help, that Mintos gets more secure to invest for us.
Why diversification is no cure-all
Diversification is a basic prinicple in finance. One distributes the risk and minimizes the default’s impact. Alltogether the risk to get hit by a default increases, but the impact decreases. Ok, let’s assume that we have spread our money over 100 loans and we can now sleep peacefully. As long as the economy flourishes everything is good. But if there is a recession looming, the image could become worse, although we diversified properly. Loans on Mintos are risky, as the borrowers tend to be more subprime, which will suffer the most from a recession, as they loose their jobs. If we now have a portfolio with those types of loans, diversification loses its benefit. The keyword here is correlation. If two investments behave similarly we speak of a positive correlation, which means that although we are diversified, this does not help us much, as behind these loans the type of borrower is the same.
Keep that in mind should we move towards a recession, as the whole p2p industry will suffer from that and the default figures will skyrocket. Of course this represents only my hypothesis and hopefully I will be proven wrong. What is sure is that there will be another recession down the road, maybe not tomorrow, but at any point in time there will be a recession.
What can we further do to minimise our risks?
We could try to assess financial figures of loan originators, if we have access to them. I guess only a fraction of the p2p investors would be able to do that. I think I would be able to run such an analysis, so why don’t I do it? It is really really time consuming and the results would not help much. Most loan originators are in no good financial shape, otherwise they wouldn’t borrow at p2p platforms. Most of them are young companies without any track record.
Conclusion – how do I proceed?
I go on as I used to: Diversification with the knowledge that the correlation will beat me up should we slider into a recession. I do hope to see that coming before it will happen. If am going to succeed with this strategy I do not know, at least I do know that there are risks out there. If someone became afraid due to what I have written or by the Eurocent incident, I have the following advice for you: Pull out all your p2p money. With interest rates of 12 percent or above we have to deal with complete defaults, we are in a high risk teritory with p2p. And some more pieces of advice: Try to listen to your common sense, be critical. Don’t believe everything what your banker, financial experts, bloggers (that includes me) and your friends at the pub are telling. Most of the time we only get to hear stories of sucesses, busts won’t be mentionned to much 😉 Or did a friend tell you about how he burnt some cash with dumb decisions? I guess not, and when I hear success stories around my friends I mostly think I am pretty dumb and the worst investor the earth has seen 😉 What I want to tell you by this: Most people have their own agenda, even if there aren’t any financial goals involved. Some people like to be seen as a “star”. Keep that in mind and try to build your own opinion. It is your money, and you suffer the losses yourself, no one else. Be critical, as well to what I write here. It is possible that I interpret somethings wrong or don’t see the big picture. I try to write my posts as objectively as I can and won’t recommend anything what I don’t like (even though I am using affiliate links).
Ok, that was longer then expected, hopfelly I did not bore you. If questions arise, please post them.
It was foreseeable that my really high Mintos return of over 20% would drop at some point. It happened and lies now a little shy of 18%, what is still very appealing.
What are the reasons for this reset?
There are three main reasons. Firstly, the bargains on the secondary market are very limited, and very hard to get respectively. Secondly, the supply of short term loans was too slight, and therefor I was unable to invest all my liquidity there. Last but not least, a trade on the secondary market went bad and hit my return (You win some, you lose some 😉 ). In the end these three factors caused the decrease in my return. Due to the circumstances I am bound to invest more passively at the moment.
Higher interest rates
For some time the loan supply did not look that promising at Mintos. Mogo car loans only yielded with 10.5%, short term consumer loans peaked at 11.1%. Luckily the luck seems to have turned (as other times in the past). Mogo car loans are now offered at 13% (or slightly more for longer terms) and there are new loan originators. The newest addition is Albanian short term loan provider luteCredit which offers loans with 13.5% at the moment. The duration is with about one year somewhat longer compared to other loans, but for this return I am willing to take chances. Hopefully this situation remains as it is for a longer period 😉
Most Investors from Germany
I received some info about the Mintos investors. Most investors come from Germany and are followed by Czechs and Spaniards. Germans like car loans (37% of total investments), personal loans (27%) and short term loans (24%). So more then half (27 + 24 = 51%) of the Germans investments are in consumer loans.
Referral Scheme / Cashback / Promo Code
At the moment there is a refer a friend scheme in place which (valid until July 7th). Sign up and write this code FDQ1DL into the field „promo code“. This will pay you 1% cashback on your invested money for the first three months. If you read this post after expiration, you can still benefit from the 1% offer by registering through this link. This is the more elegant way, as you don’t need to fill in any promo code.
If you have questions, don’t hesitate to contact me.