This is how Mintos compares to other European platforms.
|Platform||Link||Target Rate (%)||My XIRR (%)||Status||Live Rating|
|Review||Variable||11.47%||CLOSED (to UK)||4/5|
What is Mintos?
Mintos started in 2015 and offers something a little different from the competition. This is a platform for different loan originators to place their loans to be funded by investors. Headquartered in Riga, Latvia, this really hit a gap in the market. Loan companies could simply offer their loans on the Mintos platform and become P2P lenders without the expenses of setting up a website. For Mintos, this also allowed them to greatly scale up operations without becoming a lender themselves. Their fortunes contrasted massively with other firms such as Bondora.
The main source of loans were unsecured personal loans for short periods, akin to pay-day loans. More recently, with an increase of loan providers loans have been seen for other purposes such as cars or property. The loans remain unsecured with the exception of mortgages. To compensate for this, many loan originators on Mintos operate ‘buyback’ guarantees. These offer to buy back the loans if they become defaulted. This service is possible because many loans are made at seriously high interest rates. For the security of a buyback, investors have to settle for a much lower return.
Mintos have further expanded with the offering of loans in different currencies. Notably GBP and USD as well as EUR and other European currencies are offered. This adds an element of currency risk that investors should be aware of. Exchange rates can fluctuate and quite heavily for some currencies. As the diagram shows, there is a lot going on:
Here is a table showing Mintos features:
|Investment Type||Personal Loans|
|Minimum Investment||10 EUR|
|Available in ISA?||No|
|Active on forum?||No|
No entry to the UK at present
Since June 2019, Mintos closed their door to UK investors. This was due to not getting sufficient permissions from the Financial Conduct Authority to operate. You can view the judgement here. Whether this will change in future is unknown. The only option for current UK investors is to run down their accounts as loan repayments are made. There are several other European-based platforms similar to Mintos that do offer their services to the UK such as Twino. This Mintos review will be updated once this changes.
Are Mintos profitable?
Mintos is not a UK company so does not file reports with Companies House. However, it does make its annual reports available on its website. The most recent one covers the 2019 financial year and was uploaded on July 14, 2020. Here we can see a tale of a company expanding rapidly: the commission income has doubled to 9M EUR, but losses have risen as well to almost 1M EUR. The reason for this is employee expenses and administrative costs have risen faster.
In cash flow terms, the business is virtually at breakeven. There are large charges for depreciation and a share-based payment charge.
Some red flags may be that the business has capitalised a lot of development costs: over 1M EUR in the last year. These comprise wages which appear on the balance sheet and thus improve the profit and loss position.
So clearly, at the moment Mintos are spending more than they are taking in. This has been funded by the issue of share capital: EUR 1.6m was raised in the last year. For the moment, it seems that the near term future is secure as these payments are part of a EUR 5m package agreed in 2018. This should be enough to sustain the current level of losses for another 1-2 years.
It should be noted that the investment climate deteriorated with regard to P2P significantly in 2020. Ratesetter – once an IPO candidate – was sold off for a mere pittance.
Mintos Operating Model
The operating model is slightly different from others. Because there are loans available in several different currencies, your wallet also holds all these currencies. It is possible for UK users to fund their account in GBP using a bank transfer (Mintos now have a UK bank to accept deposits). From there, there is an ‘exchange’ function which allows you to change into whichever currencies that you want.
By far the most popular currency available for loans is EUR. This is unsurprising given that most of the originators are from the Eurozone. There are currently only two (Mogo/1pm) offering GBP loans. Loans must be funded with the same relevant currency.
Individual loan listings come with far less detail than other P2P platforms. For example, there is no information about the borrower. We just have the loan amount, interest rate and rate term. Some information about the purpose of the loan is included together with the LTV (if it is for a car). The name of the originator is also included, which is important as we will see later on.
The last distinction is whether a loan is protected by the buyback guarantee or not. These loans appear with a yellow shield next to them and promise to be bought back if they become more than 60 days delinquent. This is slightly different from some provision funds whose purpose is only discretionary (buybacks will automatically kick in). It is similar to the provision fund in that the guarantee is only as good as the company behind it. It is not being made by Mintos itself.
Interest and capital is repaid monthly. Given the large number of loans available and low minimum investment there will be a constant flow of repayments into the account. To aid re-investment, Mintos offer an Auto-invest function which allows you to purchase loans that meet defined criteria.
A Change of Rules
Effective in August 2020, Mintos changed their rules, perhaps in response to trouble with loan originators. Income from lenders now pays Mintos commissions and legal fees first before any distribution. These terms retrospectively apply to current loan arrangements. This clearly is not good news for investors, and potentially could have a large effect on investment returns.
How are funds protected?
One of the key things to note is that Mintos does not have FCA regulation and instead complies with local standards. This on its own is not a red flag: there have been platforms which have been FCA regulated such as Collateral who have been a disaster for investors. The plans Mintos publish in case of its failure are slightly vague.
Similarly, Mintos is dependent upon its loan originators and are vulnerable in case an individual one fails. In the case of failure of an individual originator in theory this does not affect loans as the agreement is between investors and borrower. In practice may turn out to be problematic especially in the case of buyback guarantees and actually collecting loans.
Mitigating this is that Mintos chooses its lenders carefully. Many have ‘skin in the game’ (ie put their own money into loans alongside investors). Some lenders are big organisations on their own. For example, the UK lender 1pm is a public quoted company.
Mintos Review: Pros
There are many things to like about Mintos, some of which are:
Wide range of loans: Liquidity is no problem here, with hundreds of loans being available at one time, all of which can be invested into straightaway. If you wanted to, there is no cash drag here.
Multiple currencies: Mintos now offer a wide range of currencies, which offers investors a chance to diversify and reduce exchange rate risk.
Higher Interest Rates: On the whole rates are much higher than for equivalent loans in the UK. Personal loans can pay up to 13% with a buyback guarantee, over twice the equivalent rates (although admittedly with more risk). If you are willing to lend outside of buybacks and the EUR currency, the rates get even higher (again, with more risk).
Greater loan security: The spread between interest rates mean that on some loans, buyback guarantees can be offered.
Reputable History: Mintos has been growing rapidly and out of all the EUR-based P2P lenders enjoys the best reputation. Past performance is not a guarantee of the future, however.
Mintos Review: Cons
There are also some bad things about Mintos:
Increased Platform Uncertainty: The regulations are slightly uncertain as to what would happen if Mintos were to fail, or what power any country would have.
Exchange Rate Risk: Most loans are not in GBP and are in EUR, so an adverse movement in this currency would see the value of loans decline. I calculated monthly returns using the latest exchange rate, which can lead to big swings either way in the result.
Fees: There are no fees to upload money, but exchanging money into different currency incurs losses (although this may be possible to avoid by depositing into a wallet with Revolut or similar).
Dependence on originators: Originators have to be relied on to keep running to maintain the buyback guarantees. There are many originators, and quality and information available on them varies, which introduces more risk to the equation.
Loan recalls: A new trend is for loans to be bought back by the originators early (as is their right). Usually this is because they have managed to get finance at a lower rate.
My Mintos Investment Strategy
My strategy is simple, as I only participate in loans with buy-back. You can take out the hassle of investing entirely by using the auto-invest option and specifying the criteria that you want, but I prefer the manual method. I would estimate that at any given time around 10% of the balance is back (through repayments/buybacks). Here are my tips:
Buyback loans: I have had bad experience on Bondora from unsecured loans – a distressed loan can go for years without any action been taken. Whilst you settle for a much lower rate of interest, the buybacks have worked well so far.
Diversify among originators: Another key point is not to forget that guarantees are only as good as the companies that make them. So by reading about originators and splitting loans between them this reduces the risk. I try not to get too top-heavy in any particular one.
Use one currency: I tend to stick to one additional currency, which avoids exchange rate losses on the deposit. At the moment there are not many opportunities available in GBP.
Mintos rise has been great over the past few years, and the platform has increased its number of loans massively as it offers loans from a variety of originators. This brings a number of different risks including currency as many different ones are offered. This being said, the sheer variety of loans it offers make this a good platform to get exposure to European loans. A recent change which changes the priority of payments should be heeded, and could affect returns significantly going forward.
Disclaimer: This Mintos review represents my own opinions and should not be substituted for investment advice. Please research before you invest with any firm. Typically P2P investments are not covered by the Financial Services Compensation Scheme (FSCS) in the way bank deposits are, and there are no guarantees that you will receive the returns advertised (or even a return at all).