My thoughts and experience with the market leader of European loan financing
(If you are not yet on Mintos, a bonus signup link awaits you at the bottom.)
Mintos: The Dry Facts
- Platform type: Loan refinancing marketplace
- Established: 2014
- Headquarters: Latvia
- Loan regions: 29 countries in 5 continents
- Loan originators: 60 (not all active)
- Currencies: EUR, GBP, PLN, CZK, GEL, DKK, RUB, KZT, RON, SEK MXN, USD
- Loan types: Personal, car, short-term, business, mortgage, invoice financing, agricultural (rare), pawnbroking (rare)
- Registered investors: 140,002
- Funded sum: € 2.33 billion
- Repaid sum: € 1.97 billion principal + € 43.9 million interest
- Average annual return since launch: 11.89%
Mintos was co-founded by Martins Sulte and Martins Valters, both coming from the world of accounting and investment banking. In its 5 years of existence, the company has grown into a team of 65 people, won several awards, and become the largest loan financing platform in continental Europe.
The Good Bits
- Unparalleled diversification among loan types and loan originators from all parts of the world.
- Endless supply of loans, most of which have a buyback guarantee in case of default.
- The large number of originators means that Mintos isn’t too dependent on any one partner, making the platform itself extremely resilient.
- Good returns compared to other well-established platforms.
- Secondary market allows investors to sell loans at zero fees, increasing liquidity.
- Extremely high standards of transparency about the platform itself, loan originators, individual loans, and overall loan-book stats.
- Excellent interface allows easy access even to sophisticated functions, like setting up intricate manual auto-invest portfolios.
My Personal Experience
Since joining Mintos in January 2018, my experience has been largely positive: With excellent returns, a great interface, and a huge diversity of loan offerings, it’s clear why they’re the market leader. Mintos now has the largest share of my loan investment portfolio, and has earned me over € 12,800 in interest so far.
There are also things that bother me. The model of a loan refinancing marketplace introduces the effect of market forces and volatility, which normally have no place in the world of loan financing.
This works in our favour when loan originators are in need of cash, and compete over investors’ money by offering high interest rates. But I’ve also gone through at period when demand was satisfied, interest rates dropped sharply, and originators actually bought back their financed loans to relist them with lower interest rates.
Even in normal times, loans are often extended, repaid early, or bought back before they reach maturity, as loan originators use Mintos as a cash-flow balancing mechanism. All this commotion forces investors to always be on guard, reassess the opportunities on the marketplace, and often redistribute their money, which is a hassle.
Finally, Mintos customer service used to be excellent and provide quick and professional responses, but has become so busy with the new investors, it’s difficult to get any reply out of them.
While Mintos itself is a great platform and seems highly unlikely to fail, the loan originators they work with are a different story. Almost all of them issue loans at the highest legal interest rates, to the weakest borrowers, which means that the ratio of late loans is often high. Many originators walk a fine line between profit and loss. If an originator goes out of business, its buyback guarantee becomes meaningless.
In theory, Mintos Ratings help distinguish the stable originators from the risky ones. In practice, some of the high-ranked originators have abysmal loan performance, which puts even them at financial risk. They also tend to offer lower rates, which makes investing in their loans less attractive. And it’s difficult to judge originators financials, as they’re usually out of date.
Managing your portfolio requires a lot of homework, and invokes constant self-doubt. That being said… So far there has only been one case of a loan originator going out of business while having open loans on Mintos. It happened about two years ago, when the platform was younger and less experienced.
These days Mintos claims to monitor loan originators very closely, using more detailed financial information and loan statistics than the ones displayed publicly. There were cases when they forced loan originators to buy their outstanding loans and leave the platform before closing down shop. These are considered wins for investor protection.
Mintos has recently announced its intention to become an online bank. This natural next step indicates a bright future for the entire industry. But if Mintos succeeds in acquiring a banking license, I would see it as the point where they can no longer remain an uninvolved mediator, and need to take more responsibility in insuring and compensating investors in case a loan originator goes out of business*.
My ambivalence towards Mintos is likely to last for many years. Despite its downsides and complexities, it’s still the most stable and diversified platform in Europe, the cornerstone of every European P2P portfolio.
*Mintos has also applied for a license to run lending operations in the UK. This application was denied due to failure to comply with UK regulations. Interestingly, one regulation dictates that a business like Mintos should take responsibility for the operations of its contractors, the loan originators. Perhaps it’s a sign that Mintos should stop celebrating its success as a startup, and start taking itself more seriously as a business managing the wealth of over a hundred thousand people.
Legal notice: This post is not meant as investment counselling! I’m just a fellow investor sharing his personal experience and thoughts.