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When using Mintos, the P2P investment platform, there are so many investment options available for you to choose. While writing this article, I saw that there were about 150,000 loans in both the primary and secondary markets. Luckily Mintos provides investors with filters that can help you determine where to place your money.
I previously explained two different methods to manage your reinvestment – Active Management and Passive Management. Let me run you through an active re-investment process.
How do I Choose High Quality Loans on Mintos P2P?
I have to admit, when I first wrote this article I was investing in loans through the Georgian Lari (GEL) as they were paying out over 18% (as you will see in my pictures further down). I do not live in Georgia, nor do I have any family or residence there. My main goal was the juicy 18% return that was being offered. Unfortunately, since then, GEL loans have dropped their return now only paying out ~16%. However, other loans through Russian Ruble (RUB) and Kazakhstani Tenge (KZT) still payout over 18% p.a.
When choosing loans to reinvest in, you must think like a bank (as you are the bank in these transactions). Unfortunately, we don’t have the same information as what a bank would, at least not in the same detail, however, similar principles still apply. As the loan provider, you want to maximize your chance of receiving timely investment returns.
Here, I will show you what I look for when selecting loans:
Mintos Custom Settings
It is important to look at the Secondary Market and the Primary Market to get an understanding of the loans available. I look at the Secondary Market first to see if there are discounted loans that are not available in the Primary Market.
Selecting loans that have a Buyback Guarantee is extremely important unless you are willing to lose all your investments. The buyback guarantee means that the loan originator will pay back your investment if the borrower was to default (go 60 days without payment). You won’t get any interest for that period, but more importantly, you won’t lose your initial investment. However, be aware. If the loan originator was to go bankrupt, the buyback guarantee is counted as invalid, and you won’t get your money back. Therefore, it is important to diversify your loans with multiple loan originators.
I select loans that have full amortization as I believe this is much easier to manage repayments. Amortization is a way of spreading out the loan into monthly payments. Mintos lets you select loans based on:
- full amortization (paid off in monthly instalments)
- partial amortization (paid off in big instalments near the end of the loan period)
- bullet (all interest is paid at the end period).
When I choose loans, I want to know that the amount is being paid down on a regular monthly basis.
I look for loans between 1 month and 18-month repayment time as it is best to get your money in an out as quick as possible. No one knows what will happen in 5 years, in 1 year, or tomorrow. I wouldn’t personally want to have my money locked up in 3 or 5-year loans if there was a financial crisis in the world. I also avoid anything with an initial timer period of less than 1 month (unless it only has one month to go) as there is no payment history on the loan.
Payment history falls into several categories, including Past Repayments, Payments on Time and Status
- Past Payments – The more the better. Past repayments show that the borrower is more likely to pay the loan. These show that borrower knows how to use the system, and has put money down to pay off the loan. When I was investing in P2P earlier on, a lot of my investments were in loans with a period less than 1 month with no payment history. Nearly all of these reached “default” status, encouraging me to update my strategy.
- Payments on Time – If you are expecting to receive a certain percentage return on these investments at certain time periods (to further reinvest this money), you need to choose loans that are paid on time. Loans that have multiple payments coming in late, can imply that the borrower is struggling to meet repayments, potentially jeopardizing future repayments.
- Status – As mentioned above, only invest in loans that are current. Filtering out loans that are “late” contravenes the other payment history rules.
Yield to Maturity
YTM is the percentage return to expect on your investment. The amount you select can vary depending on you. I set my amount to an arbitrary number above 10%, however, I usually filter my results to show highest YTM at the top of the list.
The amount you invest can vary depending on multiple factors not discussed in this article. I make sure that all of my investments are above “8” of whichever currency invested in. Above 8 means that you will see interest come into your account each month. As the yearly percentage return is split up into 12 separate months, any investments lower than 8 can risk receiving no interest return on some months.
Sign up to Mintos Using this link to receive 1% of your average daily balance which is paid in 3 instalments for the first 90 days.
Important Considerations When Investing In Mintos
Late Payment Fees
I mentioned “late payment” under loan history above. However, I thought it wise to elaborate a bit further. Not all loan originators pay interest on late payments. This is important to realise.
To find this information out, Investors must go through each of the loan originators pages and find the items for “Interest income on delayed payments” and “Penalty Income”. There you will see if interest is paid out, and at what percentage.
Another important factor is that each loan originator has a variable grace period. Seeing as the grace period is not counted as being late, there is no interest being accrued in this time. If the loan is not paid in that time, then the grace period counts towards the loan being late. Some loan originators have a grace period for up to 2 weeks.
Mintos Tax Implications
How does your country handle tax on your investments?
It could be wise for you to determine how your country taxes your returns as then you can structure your investments accordingly. For example, if you have to pay tax on the interest gained alone, it would be good for you to select loans from the secondary market at a discount as the discount amount won’t get taxed. Similarly to cashback offers – If a loan originator offers cash back if you invest in their loans, is this taxed in your country?
These are all questions that you need to ask yourself before determining how you re-invest your earnings.
Money Exchange Cost
Investing in Georgian Lari (GEL), Russian Ruble (RUB) and Kazakhstani Tenge (KZT) may look inviting as you can earn in excess of 18%+, however, you must think how much it costs to invest in that currency.
Please note: Before investing in anything do your own due diligence and research. Nothing in this article is financial advice. Just one man trying to share his working and investing experiences!