Mintos is a peer-to-peer lending platform in Europe. Like many other FinTech companies of this type, it is based in the Baltic region; in Latvia specifically. However, they do have other offices in Mexico and Poland.
Mintos started operating in 2015, but has experienced rapid growth due to getting a lot of things right and becoming popular with financial bloggers due to its ease of use and transparency.
Although it’s still early days for P2P lending in general and Mintos as a platform, they have some incredible numbers to be proud of.
The average net annual return for investors is 12.06% as of June 2019, with more than 150,000 investors registered from all over the world, an average investment of €4,925 and more €47,000,000 in interest paid to investors.
Another important statistic to look at is the loan book growth, and here again, Mintos is doing very well as can be seen in the following screenshot.
The total money invested so far is higher than 2.2 billion Euros, which is a staggering number for such a young platform. There is no doubt that Mintos is the biggest player in P2P lending in Europe at the moment. There are some good competitors, but none of them provide the security and track record that Mintos does.
All their employees (60+ as of June 2019) are listed on their website and this is a nice touch that enhances the feeling of transparency and peace of mind. I am one of those who take a look at these pages on a website and use them when judging whether I should invest on a platform or not. Everything counts.
Mintos is a platform that is in line with EU law, so when you invest you won’t have any trouble with your accountant or tax authorities back home in terms of explaining what you are doing.
Finally and very importantly, Mintos as a company is profitable, so they are not only running on investor money but are actually turning a profit, which means that they have a much higher chance of standing the test of time compared to some other competitors that are still in startup mode.
How Does Mintos Work?
Mintos is a loan aggregator, which means that it partners with loan originators worldwide to bring in their loans onto the platform. These loans would be pre-funded, which means that the originators themselves have supplied the loan to the end customer, and are now reselling part of that loan to us investors via Mintos.
The people at Mintos conduct their research on each loan originator periodically and assign them a score based on various factors. They also provide information pages on each of these originators so that as an investor you can easily learn more about them. No other platform in Europe currently has anywhere close to the number of loan originators that Mintos has. This contributes to the huge loan pool that Mintos currently has and improves liquidity.
Every loan originator is required to have skin in the game, and many of them also provide a buyback guarantee.
The buyback guarantee means that if a borrower defaults, the loan originator will automatically buy back the defaulted loan from the investors and also pay them interest for the period during which the loan was in default.
Some people have thus asked me where is the risk in investing in Mintos when loans come with a buyback guarantee. We will have a look at the risks later but to answer that question, the risk is that the loan originator itself goes out of business. This has so far happened once, with Eurocent, a Polish loan originator, going bankrupt. As of today the funds I had invested with Eurocent loans have not been recovered, although there is still some hope that some funds will eventually be returned to investors. I personally treat those funds as bad debts and assume they won’t ever be recovered.
There are no costs to investors when using Mintos. Taxes are to be declared and paid in your country of residence and Mintos thus not withhold any tax.
Mintos is therefore just the go-between bringing together loan originators and investors. This allows investors to use one website to diversify their investments across several countries, loan types and even different currencies.
You can deposit either Euros or USD into your Mintos account, and there is a 1% charge for currency conversions. I have actually used Mintos to “save money” on currency conversions, feel free to take a look at my separate post on how to save money with currency conversions.
Mintos is more than a usual P2P lending platform, it is a marketplace for pre-funded loans. Instead of accepting borrowers and listing their own loans, they are working with several loan originators and list loans to the marketplace. This allows investors to diversify the investments between several countries, loan types and currencies. Loan shares are listed on the Mintos marketplace, where the minimum investment is €10 per loan and annual returns as high as 14%.
Who is Investing on Mintos?
You might think that investing is something exclusive that only very knowledgeable people can partake in, but this is not true. Anyone with a basic knowledge of money and an interest to learn more about it is a good candidate for investing in P2P lending.
I spoke with Mintos and asked them about the typical profiles for their lenders, and they told me that they come from all walks of life and the amounts invested range from a few hundred euros to millions of euros. In the end, it doesn’t matter how much you invest, everyone can get the same returns on their investment in terms of percentage ROI.
You might also be under the false impression that only residents of certain countries are allowed to invest. This is far from the truth, as you can invest from all over the world, with only a few restrictions based on EU regulations. If you’re an EU resident, you can definitely invest.
To give you an idea, the top countries I’m seeing new investors join from after reading my articles or contacting me are the following: UK, USA, Germany, Netherlands, France, Spain, Belgium and Malta.
Mintos is open to both private and corporate investors. So if you want to invest via your company, you can easily do so.
What Can You Invest in?
At Mintos, investors can invest in different types of loans originated by many different loan originators.
Loans can be of the following types, and you can, of course, limit your investment to specific types when setting up your auto-invest.
- Mortgage Loans
- Car Loans
- Invoice Financing
- Business Loans
- Short-term Loans
- Personal Loans
- Agricultural Loans
Where Can You Invest via Mintos?
Another question is which countries you can invest in via Mintos. To make sure we are well diversified, it’s important that we spread our investments across different countries to reduce our reliance on any one country’s economic performance. We can further add another layer of diversification by investing in loans denominated in several different currencies.
With Mintos, you have the option of investing in 30 different countries and 12 currencies.
How I’m Investing in Mintos
I am currently using several auto-invest profiles, however, I have also begun using the new Mintos feature Invest & Access, which promises optimal investing and rebalancing while also giving you liquidity through the secondary market if you ever need your money quickly.
As you can see in the screenshot below, my net annual return is 11.42%, which is a rate I’m very happy with, considering the measly returns obtained if I leave the money in a savings account at the bank. Of course, there is much more risk with P2P loans, but the return rate of more than 11% adequately factors in the added risk.
You might see other financial bloggers report higher returns, which you can certainly achieve if you go for longer-term loans. I tend to stay within the 24-month range for my loans, as I feel it gives me some extra flexibility if I decide to re-allocate my funds to better asset classes at a later point in time.
I have invested over €150,000 into the platform, and had one loan originator, Eurocent, default. Because I make sure to diversify the funds widely and also use the buyback guarantee feature, I only lost around €600 which is dwarfed in comparison to the profits made so far on Mintos.
Due to having invested a substantial amount in Mintos, I get to have my own personal contact on the platform, so whenever I have any queries I can bypass the general support system and go to my contact directly. I really appreciated this as it gives me extra peace of mind knowing that there is a specific person who knows me and the way I invest and can answer my queries that same day. Although this is not something that is advertised on the Mintos website, I believe they assign a personal contact once you invest more than 50,000 euros on the platform.
However, even if you don’t have a personal contact at Mintos, you will still be able to get great support via email, phone or their online chat. In fact, whenever I need to check something quick I typically use the online chat facility on their website.
Mintos Loan Originator Ratings
When you set up an auto-invest strategy, you will notice that all loan originators have been assigned a Mintos Rating. The Mintos Rating is meant to be a gauge for each loan originator’s financial and operational stability. According to Mintos, the loan originator’s ability to service and originate loans is the most important factor when assessing loan originators. In addition, the financial standing of the loan originator is a material factor when the buyback guarantee is provided to investors.
Ultimately, the Mintos Rating measures the counterparty risk or risk of loss resulting from a loan’s originators’ failure to service and/or transfer the received payments from borrowers to investors or meet other contractual obligations (including but not limited to the buyback obligation). Counterparty risk is capturing operational and default risk of the company acting as a loan originator, servicer of loans and obligor of the buyback guarantee to investors. The materialization of those risks would cause a disruption in loan servicing and the buyback fulfillment which are the core risks related to loan originators on Mintos.
The rating is driven by five core factors characterizing each loan originator: operating environment (10% factor weight), company profile (15%), management and strategy (15%), risk appetite (20%) and financial profile (40%). Additionally, a support factor is incorporated for loan originators who receive guarantees from the group or a related company.
The Mintos Rating is based on information obtained during the initial due diligence process and data from ongoing monitoring. This includes the primary information from loan originators such as management interviews, site visits, audited and interim financial statements, corporate presentation, credit policy and risk control documents. The rating is updated annually, except in certain instances where a loan originator’s rating requires an immediate change. This could be due to a cash injection, positive or negative regulation being implemented in the country of the loan originator and so on.
I would recommend doing your own research in loan originators if you are investing big sums of money, else you can definitely use the Mintos loan originator ratings as your guide for smaller amounts.
Potential Downsides of Investing with Mintos
Let’s have a look at the main risks of investing in P2P lending and Mintos in particular.
Loan Originator Risk
As we have already mentioned, P2P lending is a moderate risk investment, and you must be aware that loans can default. With Mintos, you get a buyback guarantee as we discussed earlier. Thus the biggest potential downside of investing with Mintos is that a loan originator goes bankrupt, as I described with the Eurocent case above.
The only way to mitigate this risk is to have a keep an eye on the profitability of the loan originator. Most of them release their financial reports to the public every year, so you can see how they are doing. This is not as easy as it sounds, however.
Only 38% provide audited financial statements. Unaudited financial statements are not as trustworthy when compared to audited ones. You’re basically relying on what the business is saying about itself rather than what a trusted 3rd party (audit firm) is saying.
Almost 45% of loan originators are not profitable. It’s quite normal for new businesses in this space to be unprofitable for the first few years, but you also have to factor in the increased risk of them spending all the investor money before they turn profitable, which leads to complications including bankruptcy.
Around 80% of the loan originators are less than 10 years old, which means that they were founded after the last great world recession and we don’t know how they will perform if another one hits in the coming years. During a world recession, credit companies are some of the hardest hit as borrowers default on their loans due to having lost their jobs or having experienced severe pay cuts.
Interest Rate Risk
One other risk is that interest rates rise in the future, making it harder for you to sell your existing loans with lower interest returns on the secondary market, if you wished to do that. Of course, you could also just let the loans run their course and continue receiving payments until maturity.
When investing on P2P platforms, it’s best to invest money that you can afford to use without running into severe financial troubles. That way, you minimise the chances of having to sell loans prematurely, potentially at a time that is not advantageous.
Cash Drag Risk
Cash drag varies among different P2P lending sites, and thankfully this hasn’t been a problem with Mintos. As of 2019 Mintos is extremely liquid meaning that you can throw thousands of Euros at the platform and see them invested within minutes, and conversely, you can also sell your loans on the secondary market within a day or two.
Although it is not currently a problem, it could become so at any point in time, even though it might only be for a short time. If there is a surge in popularity for P2P lending platforms, we will have a situation where lots of lenders are competing to lend while there are not enough borrowers, which will result in a higher cash drag, because you have to wait your turn.
To put this into practice, let’s say that the interest rates you earn when lending are 10%, but, on average during the year, half your money is sitting as cash in your lending account with no borrowers available. With just half your money being lent and the other half in cash, it means you’re actually earning just 5%.
That’s an extreme example. Cash drag is not usually anything like that much. In fact, it typically reduces a 10% rate down to between 9.4% and 9.8%.
Considering these potential downsides, I think that investing in P2P lending platforms and Mintos, in particular, is a very good deal for investors in 2019, because there aren’t any other readily available investment opportunities with such a favorable risk-return profile.
Moreover, Mintos is the currently the biggest platform in Europe and has proved itself to be competent by providing great communication with its investors as well as a very liquid primary and secondary market for loans for several years now.
Foreign Exchange Risk (or Opportunity)
You can invest in loans across 12 other currencies apart from EUR, including USD, GBP and RUB. This means that when you convert back to Euro, you might lose money depending on how the rates have moved in the meantime. This could, however, also be an opportunity to make extra returns. I’ve seen investors using currency arbitrage to raise their overall returns to 15-20% which is really impressive.
I like to keep things simple myself so I only invest in Euro. I also use Mintos to minimise the cost of currency conversions.
Frequently Asked Questions about Mintos
I’ve spoken to many people about Mintos and I get to hear many questions that investors seem to have in common, so I’ll try to address them in this section. If you have any other questions you’d like me to address, just leave a comment below the post.
How can I reduce the number of late loans? e.g. 1-15, 15-30, 30-60 etc
I don’t think you can really avoid that unless perhaps you study your portfolio’s performance and identify if there are any specific factors that result in loans being regularly late, for example, loans from a particular country or a particular type. This is not something that I’m too concerned about, plus I don’t really get into hyper optimization with my portfolios as I don’t feel it justifies the time investment given the yearly returns. Therefore I haven’t done such a study myself. However if any of you reading this post do conduct such a study, I’d definitely be interested to know what you find out.
How are loan returns taxed?
Mintos sends you the returns gross of tax; they don’t withhold any taxes. You will, therefore, have to declare the income in your country of residence, as explained in further detail in my post about P2P lending platform taxation. I’ve also written a post about how crowdlending is taxed in Spain specifically.
Do you recommend just investing in Mintos or do you recommend spreading your money across different platforms?
Mintos is my preferred platform and its where I invest most of my P2P portfolio, but I would always recommend spreading your capital across different platforms. You can have a look at my returns on different P2P platforms in 2019 and my post about the top P2P platforms in Europe for 2019.
What returns can I expect?
Over the past three years, my experience and that of my fellow investor friends have shown that you can achieve anywhere between 10% and 14% returns depending on how you invest. Every platform has its own average return and that also depends on the amount of risk that you are assuming with the loans on that particular platform. You can read about my returns on different P2P platforms here.
I don’t have as much capital as you to invest, what is the minimum to invest at Mintos or P2P sites in general?
I would say that you can start with as little as €1,000 to see how things work on any of my recommended platforms, but to make any meaningful income you need to invest at least €10,000. nAything less than that is not worth the time and hassle in my opinion. If you have more than that amount to invest, then it’s even better.
Does Mintos allow investments in cryptocurrencies?
No, this is not something that Mintos provides at the moment, but I wouldn’t be surprised if they branch into this area in the future. For now, you could have a look at my article on the best P2P crypto loan platforms.
I am a bit worried about having a significant number of loans that are late. Is it normal?
Yes, it’s normal to have a good portion of your loans being late with their principal and interest payments. Here’s my breakdown in percentages:
- Grace Period: 3.4%
- 1-15 Days Late: 7.5%
- 16-30 Days Late: 12.6 %
- 31-60 Days Late: 6.7%
As you can deduce, around 30% of my loan portfolio is late, but that doesn’t mean I should start to worry, as all my loans are covered with a buyback guarantee.
There should be no loans beyond 60+ Days Late if you’re using buyback guarantee, as that would mean that the loan originator is having problems buying back the loans and is likely going to go bankrupt. The only loans I have in my account that are 60+ Days Late are in fact all the loans belonging to Eurocent, which went bankrupt last year and is currently in administration.
How long would it take for me to sell all my loan portfolio should I need quick liquidity?
From my experience in tests I’ve conducted and also those done by other investors I’ve spoken to, it takes between 24 to 72 hours to sell a complete portfolio. Size doesn’t seem to be a problem, as I know people who have sold 7 figure portfolios on the secondary market in this short timeframe.
Whether you can sell your loans at par or whether you’d need to apply a discount depends on what kind of rates loan originators are offering at the moment you decide to sell versus what rates they were offering when you bought. For example, if you invested in Mogo loans at 11% 6 months ago and the average for Mogo loans is now 12%, nobody is going to buy your loans unless you offer them at a discount.
In the end, you might have to give up an equivalent of a week or two of interest income to sell your loan portfolio, which I think is a good tradeoff.
What’s New at Mintos in 2019?
In the early part of 2019, Mintos launched Invest & Access, which is a tool that lets us choose from three different investment strategies. They are basically pre-configured auto-invest systems, with the added bonus of having immediate liquidity through the secondary market if you need the funds invested for other purposes.
At the P2P Conference we have also seen Mintos demo their mobile app, so that should be coming later in 2019 and forms an important part of Mintos’ strategy to move into the space occupied by the traditional banks.
According to Mintos CEO Martins Suite, the plans for the immediate future also include the launching of a debit card that will take Mintos beyond being just a lending platform. Banks and fintechs are currently engaged in full-on competition, but fintechs have the edge when it comes to technology, so it makes sense for platforms like Mintos to encroach on traditionally banking domains like debit cards and challenge them in this way.
The inclusion of a debit card within the Mintos platform also means that investors will now have a very easy way of spending the profits from their investments. Instead of having to request a withdrawal and wait a few days for the money to get to their account (minus potential fees), investors will now be able to pay directly with their Mintos debit card.
I think it’s also worth mentioning that last year they launched a currency exchange featuring transparent exchange rates and fair fees, which allows investors to exchange money at a lower cost than through banks. Yet another advantage that makes things easier for us investors. I’ve written about this particular feature on my post about optimising for lower currency exchange costs in a separate post.
What Improvements Would I Like to See from Mintos?
We can see the cumulative number of investors on the Mintos statistics page, however, there is no clear indication of how many joined users joined every month and more importantly how many of them are even active. Many users can sign up but then never invest, and that is not reflected in the stats.
The same goes for the investment volumes section of the statistics. We can see the cumulative investment growing month by month, but we don’t have information on how many new loans were issued each month. This would give a clearer of volumes month by month.
With regards to loans, Mintos gives us a breakdown of Current vs Delayed loans, but in reality the term “Current” is not 100% accurate. It is a catch-all for recently issued loans that have not reached their first repayment date, as well as those loans which have been paying back principal and interest successfully. There is obviously more uncertainty and risk with loans that have not started their repayments, so they should not be bundled together with the others that are being repaid already.
Ownership & Related Parties Transparency
There are some long-standing doubts about the ownership of Mintos and its relation to some of the loan originators on the platform. The ultimate beneficiary owner of Mintos is Aigars Kesenfelds. He is currently the true beneficiary in 81 Latvian companies. At the same time, he owns no shares in any company.
This businessman is the true beneficiary in several real estate companies, as well as a firm that offers self-service carwash – SIA Wash and Drive, AS Skanstes Biroju Centres, SIA Mintos Finance and others. Kesenfelds’ interests in those companies are represented by AS ALPS Investments, as well as Malta-based Dyonne Trading & Investments Limited and other companies of this kind.
Since June 2018, the number of businesses in which Kesenfelds is registered as true beneficiary has increased by a total of 19 companies.
Aigars is not mentioned on the Mintos website, but especially since his name is associated with big loan originators (Mogo, Hipocredit, Lendo and others) on the platform, they should clear the situation up because many people worry about conflicts of interests that might arise due to this fact.
More Details on Loan Originators and Their Loans
I’d like to see more details such as audited statements for each loan originator, as well as a breakdown of loans issued by country, default rates and recovery rates.
It is in the interest of all investors that Mintos posts great profits year on year. While it successfully achieved profitablity in 2017, the profits dropped in 2018 when it barely broke even. This is quite normal for a rapidly growing business like Mintos, but as investors we should expect profitability to go up in the next 3 years; if not, one should question why and dig deeper into it.
Mintos is registered as a platform in Latvia, as we previously mentioned. In Latvia, there are no strict standards to adhere to for such platforms, which makes it a great place to start a P2P loan platform, but does little to assuage investors’ concerns. While the fact that there are lax laws in Latvia is no fault of Mintos, it would be good to see the platform regulated by a more trustworty financial commission in Europe.
Of particular concern is the fact that a Mintos application to open a UK branch was rejected by the FCA in the UK. This is precisely the type of authority that I would like to see lend its seal of approval to Mintos, but so far they have been unable to achieve that.
Final Thoughts on Mintos
I’ve been investing on Mintos for over three years now, and I’ve seen the platform grow from strength to strength. It’s definitely the most innovative platform at the moment in Europe, and I’m really looking forward to their morphing into a financial institution with a wider range of products, some of which I’ve already mentioned above.
I think one should realistic and understand that this is an area of investment with a certain degree of general risk, and I would like to see Mintos to improve in certain areas as mentioned above, however when I balance the risks versus the return I feel that investing in such platforms and Mintos in particular is justified.
I keep a certain part of my net worth constantly invested in P2P lending platforms to take advantage of their fantastic returns, and Mintos by far holds the biggest portion of this investment. I have no plans of changing that in the near future as I have been very happy with the performance so far.
Therefore, we can wrap this up by saying that Mintos comes highly recommended from me. Please leave any questions you have about the platform below and I’ll be happy to answer them.