Just started with P2P lending (Mintos). How risky is it?

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YRT70
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Just started with P2P lending (Mintos). How risky is it?

Post by YRT70 » Sun Oct 06, 2019 7:53 am

I just started with Mintos. Getting on 8-9% on my money sounds very good, obviously. I understand that means it's higher risk.

So what are the risks exactly?
-The loaner won't pay. I read the buyback guarantee helps with this, a lot.
-Mintos could go bankrupt I guess or some fraud might happen with it.
-The loan originator could go out of business. Perhaps only using companies with the highest ratings (A,A-) would protect?

What's your take on the risks? What would be a reasonable allocation for this platform?

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RickBoglehead
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Re: Just started with P2P lending (Mintos). How risky is it?

Post by RickBoglehead » Sun Oct 06, 2019 8:19 am

https://www.bogleheads.org/wiki/Peer-to-peer_lending

viewtopic.php?t=170023&start=50

viewtopic.php?f=10&t=211872&start=50

viewtopic.php?t=274173

A reasonable allocation as an "investment" would be zero.

If you like gambling, and have throw-away money, that might be different.
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Valuethinker
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Re: Just started with P2P lending (Mintos). How risky is it?

Post by Valuethinker » Sun Oct 06, 2019 8:33 am

YRT70 wrote:
Sun Oct 06, 2019 7:53 am
I just started with Mintos. Getting on 8-9% on my money sounds very good, obviously. I understand that means it's higher risk.

So what are the risks exactly?
-The loaner won't pay. I read the buyback guarantee helps with this, a lot.
-Mintos could go bankrupt I guess or some fraud might happen with it.
-The loan originator could go out of business. Perhaps only using companies with the highest ratings (A,A-) would protect?

What's your take on the risks? What would be a reasonable allocation for this platform?
Larry Swedroe recommends a managed fund that does this.

That's the only way I would encourage a private investor to get involved. Exposure to single loans is way too risky.

This is peak of the economic cycle stuff. These borrowers will be among the first to default when things turn down.

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YRT70
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Re: Just started with P2P lending (Mintos). How risky is it?

Post by YRT70 » Sun Oct 06, 2019 8:49 am

Valuethinker wrote:
Sun Oct 06, 2019 8:33 am
Larry Swedroe recommends a managed fund that does this.
thanks. Yes I read that. I have not been able to find one that I can buy though. Have you? I'm in The Netherlands.
That's the only way I would encourage a private investor to get involved. Exposure to single loans is way too risky.

This is peak of the economic cycle stuff. These borrowers will be among the first to default when things turn down.
On the bright side: I only invest in loans with a buy back guarantee and only invest 25 euro per loan. That way I diversify across many loans and loan originators.

Perhaps the loan originators with the highest ratings are less likely to default? https://explorep2p.com/mintos-lender-ratings/
Last edited by YRT70 on Sun Oct 06, 2019 8:55 am, edited 2 times in total.

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YRT70
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Re: Just started with P2P lending (Mintos). How risky is it?

Post by YRT70 » Sun Oct 06, 2019 8:50 am

RickBoglehead wrote:
Sun Oct 06, 2019 8:19 am
https://www.bogleheads.org/wiki/Peer-to-peer_lending

viewtopic.php?t=170023&start=50

viewtopic.php?f=10&t=211872&start=50

viewtopic.php?t=274173

A reasonable allocation as an "investment" would be zero.

If you like gambling, and have throw-away money, that might be different.
thanks. I'm considering using 1% of my portfolio. Wouldn't call it throw away money but with bonds returning ±0% in the EU, I'm looking at other options.

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Re: Just started with P2P lending (Mintos). How risky is it?

Post by Jack FFR1846 » Sun Oct 06, 2019 8:57 am

Sounds like Lending Club. Be prepared to lose your money.
Bogle: Smart Beta is stupid

Schlabba
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Re: Just started with P2P lending (Mintos). How risky is it?

Post by Schlabba » Sun Oct 06, 2019 9:01 am

If you hold the MSCI World you can also achieve 7 to 10% (before inflation) returns. Why would you bother?
IWDA: MSCI World | EMIM: MSCI Emerging Markets | AGGH: Global Aggregate Bond Hedged to €

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Re: Just started with P2P lending (Mintos). How risky is it?

Post by Valuethinker » Sun Oct 06, 2019 9:04 am

YRT70 wrote:
Sun Oct 06, 2019 8:49 am
Valuethinker wrote:
Sun Oct 06, 2019 8:33 am
Larry Swedroe recommends a managed fund that does this.
thanks. Yes I read that. I have not been able to find one that I can buy though. Have you? I'm in The Netherlands.
That's the only way I would encourage a private investor to get involved. Exposure to single loans is way too risky.

This is peak of the economic cycle stuff. These borrowers will be among the first to default when things turn down.
On the bright side: I only invest in loans with a buy back guarantee and only invest 25 euro per loan. That way I diversify across many loans and loan originators.

Perhaps the loan originators with the highest ratings are less likely to default? https://explorep2p.com/mintos-lender-ratings/
Apologies. I did not realise which board we were in.

P to p varies by country so conditions differ.

Beware that this is nonetheless high beta investing. In an economic downturn default rates on these loans may rise disproportionately. There will be borrowers who have figured out how to "game" the system and secure more credit than they can possibly repay.

minimalistmarc
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Re: Just started with P2P lending (Mintos). How risky is it?

Post by minimalistmarc » Sun Oct 06, 2019 9:10 am

YRT70 wrote:
Sun Oct 06, 2019 8:50 am
RickBoglehead wrote:
Sun Oct 06, 2019 8:19 am
https://www.bogleheads.org/wiki/Peer-to-peer_lending

viewtopic.php?t=170023&start=50

viewtopic.php?f=10&t=211872&start=50

viewtopic.php?t=274173

A reasonable allocation as an "investment" would be zero.

If you like gambling, and have throw-away money, that might be different.
thanks. I'm considering using 1% of my portfolio. Wouldn't call it throw away money but with bonds returning ±0% in the EU, I'm looking at other options.
1% if your portfolio , 25 euro/loan , don’t bother. Too much admin, extra tax calculations and for something that won’t affect your net worth long term.

I know what I’m talking about. I have 300k in P2P (12 - 16% asset backed) and am now regretting it and trying to rebalance everything I to vanguard all world

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YRT70
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Re: Just started with P2P lending (Mintos). How risky is it?

Post by YRT70 » Sun Oct 06, 2019 9:14 am

Schlabba wrote:
Sun Oct 06, 2019 9:01 am
If you hold the MSCI World you can also achieve 7 to 10% (before inflation) returns. Why would you bother?
About 55% of my portfolio is allocated to stocks. Given that bonds currently yield about 0%, I'm considering allocating some of my fixed income to P2P lending.

But you make a valid point. If I would be confident that stocks will make 7-10% before inflation, I wouldn't bother with P2P lending.
minimalistmarc wrote:
Sun Oct 06, 2019 9:10 am
I know what I’m talking about. I have 300k in P2P (12 - 16% asset backed) and am now regretting it and trying to rebalance everything I to vanguard all world
Interesting. Why are you regretting it?

I was considering starting P2P with a small amount and perhaps gradually increasing it if I feel confident about it.

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Re: Just started with P2P lending (Mintos). How risky is it?

Post by minimalistmarc » Sun Oct 06, 2019 12:39 pm

YRT70 wrote:
Sun Oct 06, 2019 9:14 am
Schlabba wrote:
Sun Oct 06, 2019 9:01 am
If you hold the MSCI World you can also achieve 7 to 10% (before inflation) returns. Why would you bother?
About 55% of my portfolio is allocated to stocks. Given that bonds currently yield about 0%, I'm considering allocating some of my fixed income to P2P lending.

But you make a valid point. If I would be confident that stocks will make 7-10% before inflation, I wouldn't bother with P2P lending.
minimalistmarc wrote:
Sun Oct 06, 2019 9:10 am
I know what I’m talking about. I have 300k in P2P (12 - 16% asset backed) and am now regretting it and trying to rebalance everything I to vanguard all world
Interesting. Why are you regretting it?

I was considering starting P2P with a small amount and perhaps gradually increasing it if I feel confident about it.
I’m regretting it because I would have made almost as much for equities but with much less hassle and admin.

The point if bonds (even at 0%) is to reduce the volatility of your portfolio. P2P won’t do that

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Cheez-It Guy
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Re: Just started with P2P lending (Mintos). How risky is it?

Post by Cheez-It Guy » Sun Oct 06, 2019 12:47 pm

I loaned a good friend money once with a promise of quick payback. Still waiting. It's been years. I'm sure these borrowers are much more credible, though!

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Re: Just started with P2P lending (Mintos). How risky is it?

Post by Schlabba » Sun Oct 06, 2019 2:59 pm

YRT70 wrote:
Sun Oct 06, 2019 9:14 am
Schlabba wrote:
Sun Oct 06, 2019 9:01 am
If you hold the MSCI World you can also achieve 7 to 10% (before inflation) returns. Why would you bother?
About 55% of my portfolio is allocated to stocks. Given that bonds currently yield about 0%, I'm considering allocating some of my fixed income to P2P lending.

But you make a valid point. If I would be confident that stocks will make 7-10% before inflation, I wouldn't bother with P2P lending.
minimalistmarc wrote:
Sun Oct 06, 2019 9:10 am
I know what I’m talking about. I have 300k in P2P (12 - 16% asset backed) and am now regretting it and trying to rebalance everything I to vanguard all world
Interesting. Why are you regretting it?

I was considering starting P2P with a small amount and perhaps gradually increasing it if I feel confident about it.
With 55%-45% stocks to bonds, you can increase your return by increasing your stock allocation and reducing your bond allocation.

There is no way to say whether MSCI World will give you a 7% to 10% return in the future. If its any help the return since 1987 has been 7.86% (https://www.msci.com/documents/10199/17 ... fc565ededb). Lets hope this continues into the future!

If you really want an alternative way to invest that produces income, did you consider buying a rental? I would consider that less risky.

I am not trying to talk you out of P2P lending, but I wanted to make the point that it might be "just as good" to own an index fund instead. If you do get a 8% to 9% return on investment please do post an update on this forum. Then maybe I might allocate a few % of my money to it as well for fun and profit.
IWDA: MSCI World | EMIM: MSCI Emerging Markets | AGGH: Global Aggregate Bond Hedged to €

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Re: Just started with P2P lending (Mintos). How risky is it?

Post by minimalistmarc » Sun Oct 06, 2019 3:12 pm

Schlabba wrote:
Sun Oct 06, 2019 2:59 pm
YRT70 wrote:
Sun Oct 06, 2019 9:14 am
Schlabba wrote:
Sun Oct 06, 2019 9:01 am
If you hold the MSCI World you can also achieve 7 to 10% (before inflation) returns. Why would you bother?
About 55% of my portfolio is allocated to stocks. Given that bonds currently yield about 0%, I'm considering allocating some of my fixed income to P2P lending.

But you make a valid point. If I would be confident that stocks will make 7-10% before inflation, I wouldn't bother with P2P lending.
minimalistmarc wrote:
Sun Oct 06, 2019 9:10 am
I know what I’m talking about. I have 300k in P2P (12 - 16% asset backed) and am now regretting it and trying to rebalance everything I to vanguard all world
Interesting. Why are you regretting it?

I was considering starting P2P with a small amount and perhaps gradually increasing it if I feel confident about it.
With 55%-45% stocks to bonds, you can increase your return by increasing your stock allocation and reducing your bond allocation.

There is no way to say whether MSCI World will give you a 7% to 10% return in the future. If its any help the return since 1987 has been 7.86% (https://www.msci.com/documents/10199/17 ... fc565ededb). Lets hope this continues into the future!

If you really want an alternative way to invest that produces income, did you consider buying a rental? I would consider that less risky.

I am not trying to talk you out of P2P lending, but I wanted to make the point that it might be "just as good" to own an index fund instead. If you do get a 8% to 9% return on investment please do post an update on this forum. Then maybe I might allocate a few % of my money to it as well for fun and profit.

I was making 12 - 18% for several years but then had lots of defaults and also one of the holding companies went into administration.

If your’re going to lend, wait until banks are closing their wallets again. At the moment, only the lowest quality borrowers are paying 12%

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Re: Just started with P2P lending (Mintos). How risky is it?

Post by BeBH65 » Sun Oct 06, 2019 3:58 pm

YRT70 wrote:
Sun Oct 06, 2019 7:53 am
I just started with Mintos. Getting on 8-9% on my money sounds very good, obviously. I understand that means it's higher risk.

So what are the risks exactly?
-The loaner won't pay. I read the buyback guarantee helps with this, a lot.
-Mintos could go bankrupt I guess or some fraud might happen with it.
-The loan originator could go out of business. Perhaps only using companies with the highest ratings (A,A-) would protect?

What's your take on the risks? What would be a reasonable allocation for this platform?
Important to understand: Mintos does not provide the buyback guarantee, but instead the loan originator. When investing in buyback guaranteed loans on Mintos, it is the financial stability of the loan originator you must evaluate, not Mintos'.

For instance look up what happened with the loans from the originator Eurocent.
Last edited by BeBH65 on Mon Oct 07, 2019 3:42 am, edited 1 time in total.
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Re: Just started with P2P lending (Mintos). How risky is it?

Post by noraz123 » Sun Oct 06, 2019 4:40 pm

I wouldn't recommend P2P lending based on my experience. While not terrible, I found it a lot of hassle and I didn't get the returns that I thought were commensurate with the risk.

My experience was with Lending Club as an investor in the USA, so not clear if an investor in another country using Mintos would have similar experiences. But my issues:
  • Poor tax treatment. The goal of these investments is to yield interest income. As an American investor, this means unfavorable tax treatment unless investing in a tax sheltered account. This meant using an IRA/Roth IRA for me.
  • Additional fees and hassle for investing with an IRA. Lending Club did not offer native IRA/Roth IRA accounts. Rather, they partnered with a 3rd party that managed the retirement, and they allowed investments in Lending Club notes. This meant setting up another account with another firm, and paying a yearly fee for account maintenance.
  • Overhead of managing portfolio. To reduce risk, it is best to investment in as many notes as possible. For Lending Club, this meant buying many notes limited to $25 per note. This means you need to buy a lot of notes. If you are going to run your own selection criteria and screens, you will need to buy lots of notes. And as interest comes in, if you want to rollover to new notes, you will need to continue to screen and buy. I eventually turned to an automated screening/purchasing service - Bluevestment. I was happy with the tool, but my returns were not so great, which brings me the most important point.
  • Less than stellar returns. I found return around 5%, which if were my bond portfolio, would be great. But for P2P lending, I found to be too low for the risk I took. I found too many of my notes defaulting, and believe the P2P lending space has become "too competitive", with hedge funds and other professional money coming in, likely with more access to information, sophistication and automation than I had.
  • Hard to unwind. This is a point that many people underestimate. If you own a bond fund, and the next day you decide you want to sell, you can sell at market price and are done. With Lending Club, notes are 3 year or 5 year duration. If you want to sell/unwind, you either have to wait until the note defaults or is paid off or sell on the secondary market. Selling on secondary market takes time. When I decided to exist P2P lending, it took about three weeks to unwind, and the last set of notes were sold at a significant discount just so I could be done with it.

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Re: Just started with P2P lending (Mintos). How risky is it?

Post by Laurizas » Mon Oct 07, 2019 5:22 am

BeBH65 wrote:
Sun Oct 06, 2019 3:58 pm
For instance look up what happened with the loans from the originator Eurocent.
It has been two years since Eurocent defaulted. I have received 0 from these loans.

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Re: Just started with P2P lending (Mintos). How risky is it?

Post by Valuethinker » Mon Oct 07, 2019 5:51 am

minimalistmarc wrote:
Sun Oct 06, 2019 3:12 pm


I was making 12 - 18% for several years but then had lots of defaults and also one of the holding companies went into administration.

If your’re going to lend, wait until banks are closing their wallets again. At the moment, only the lowest quality borrowers are paying 12%
Hyman Minsky, the Nobel Prize winning economist (who researched financial crashes), defined the "Ponzi phase" of the credit cycle - when borrowers must borrow to pay interest due.*

12% in an environment of negative nominal interest rates (Eurozone) means either the banking system is really broken, leaving an unaddressed market segment, or these are very high risk "Ponzi borrowers".

You don't want to be the credit supplier to Ponzi borrowers.

*So the Minsky phases of the credit cycle are:

- hedge finance - borrowers borrow & repay

- speculative finance - borrowers borrow to repay ("roll over") existing loans

- Ponzi finance

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YRT70
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Re: Just started with P2P lending (Mintos). How risky is it?

Post by YRT70 » Mon Oct 07, 2019 9:58 am

Thanks for the constructive feedback everyone.
BeBH65 wrote:
Sun Oct 06, 2019 3:58 pm
Important to understand: Mintos does not provide the buyback guarantee, but instead the loan originator.
Yes I am aware.
When investing in buyback guaranteed loans on Mintos, it is the financial stability of the loan originator you must evaluate, not Mintos'.

For instance look up what happened with the loans from the originator Eurocent.
Would only investing in LO's with A rating protect me?

How was the rating of Eurocent before it happened?

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Re: Just started with P2P lending (Mintos). How risky is it?

Post by Austintatious » Mon Oct 07, 2019 10:56 am

Valuethinker wrote:
Mon Oct 07, 2019 5:51 am
minimalistmarc wrote:
Sun Oct 06, 2019 3:12 pm


I was making 12 - 18% for several years but then had lots of defaults and also one of the holding companies went into administration.

If your’re going to lend, wait until banks are closing their wallets again. At the moment, only the lowest quality borrowers are paying 12%
Hyman Minsky, the Nobel Prize winning economist (who researched financial crashes), defined the "Ponzi phase" of the credit cycle - when borrowers must borrow to pay interest due.*

12% in an environment of negative nominal interest rates (Eurozone) means either the banking system is really broken, leaving an unaddressed market segment, or these are very high risk "Ponzi borrowers".

You don't want to be the credit supplier to Ponzi borrowers.

*So the Minsky phases of the credit cycle are:

- hedge finance - borrowers borrow & repay

- speculative finance - borrowers borrow to repay ("roll over") existing loans

- Ponzi finance
Actually, it seems that some right here in the Bogleheads community are quite willing to take advantage of those Ponzi borrowers. We regularly and righteously advise the unwashed to avoid getting ripped off by paying a 1% management fee to a financial advisor, yet we rarely speak out regarding the blatant loan sharking that actually occurs with these so called peer-to-peer lending agencies. You rightly speak of 12 to 18 % interest rates as if they are egregious in these situations and you are right, but such rates are nothing compared to the atrocities these gouging entities are actually inflicting on borrowers. If the individual putting up the capital is getting 12 to 18 %, think of what the borrowers are actually paying as the middle men tack on their cut. I'm speaking of loans made at 35% and 36% interest rates and I'd not be surprised to learn that they can be even higher. Whatever one might call it, putting up capital for loan sharking agencies is an egregious practice that should neither be embraced nor respected by this forum.

minimalistmarc
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Re: Just started with P2P lending (Mintos). How risky is it?

Post by minimalistmarc » Mon Oct 07, 2019 1:09 pm

Austintatious wrote:
Mon Oct 07, 2019 10:56 am
Valuethinker wrote:
Mon Oct 07, 2019 5:51 am
minimalistmarc wrote:
Sun Oct 06, 2019 3:12 pm


I was making 12 - 18% for several years but then had lots of defaults and also one of the holding companies went into administration.

If your’re going to lend, wait until banks are closing their wallets again. At the moment, only the lowest quality borrowers are paying 12%
Hyman Minsky, the Nobel Prize winning economist (who researched financial crashes), defined the "Ponzi phase" of the credit cycle - when borrowers must borrow to pay interest due.*

12% in an environment of negative nominal interest rates (Eurozone) means either the banking system is really broken, leaving an unaddressed market segment, or these are very high risk "Ponzi borrowers".

You don't want to be the credit supplier to Ponzi borrowers.

*So the Minsky phases of the credit cycle are:

- hedge finance - borrowers borrow & repay

- speculative finance - borrowers borrow to repay ("roll over") existing loans

- Ponzi finance
Actually, it seems that some right here in the Bogleheads community are quite willing to take advantage of those Ponzi borrowers. We regularly and righteously advise the unwashed to avoid getting ripped off by paying a 1% management fee to a financial advisor, yet we rarely speak out regarding the blatant loan sharking that actually occurs with these so called peer-to-peer lending agencies. You rightly speak of 12 to 18 % interest rates as if they are egregious in these situations and you are right, but such rates are nothing compared to the atrocities these gouging entities are actually inflicting on borrowers. If the individual putting up the capital is getting 12 to 18 %, think of what the borrowers are actually paying as the middle men tack on their cut. I'm speaking of loans made at 35% and 36% interest rates and I'd not be surprised to learn that they can be even higher. Whatever one might call it, putting up capital for loan sharking agencies is an egregious practice that should neither be embraced nor respected by this forum.
It’s not loan shaking and the rate is fair.

Most of these borrowers want to speculate on a property investment without putting their own money down. If they default, which is common, you often don’t get back all of your capital even if LTV was 50-70%

Over my years investing I have seen borrowers use every immoral trick in the book to weasel out of paying back the money. Any rate lower than 20 - 30% would not be worth it.

I only did it because I’m the U.K. if you have zero income you can make 18k per year from interest tax year. I used my wife’s tax bracket to take full advantage.

She was earning 18k tax free. For me to work more and earn that after tax I would have had to earn 36k

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YRT70
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Re: Just started with P2P lending (Mintos). How risky is it?

Post by YRT70 » Tue Oct 08, 2019 10:43 am

Austintatious wrote:
Mon Oct 07, 2019 10:56 am
Actually, it seems that some right here in the Bogleheads community are quite willing to take advantage of those Ponzi borrowers. We regularly and righteously advise the unwashed to avoid getting ripped off by paying a 1% management fee to a financial advisor, yet we rarely speak out regarding the blatant loan sharking that actually occurs with these so called peer-to-peer lending agencies. You rightly speak of 12 to 18 % interest rates as if they are egregious in these situations and you are right, but such rates are nothing compared to the atrocities these gouging entities are actually inflicting on borrowers. If the individual putting up the capital is getting 12 to 18 %, think of what the borrowers are actually paying as the middle men tack on their cut. I'm speaking of loans made at 35% and 36% interest rates and I'd not be surprised to learn that they can be even higher. Whatever one might call it, putting up capital for loan sharking agencies is an egregious practice that should neither be embraced nor respected by this forum.
Loans that charge very high interest rates are offered on Mintos, but you can also find loans that charge about 13% for borrowers.

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Re: Just started with P2P lending (Mintos). How risky is it?

Post by hithere » Fri Oct 11, 2019 7:13 am

P2P lending can be a good investment if you pick your platforms, originators and loans carefully. IMHO, this type of investment receives more bashing on the forum than it deserves. I think that a good portfolio on Mintos will likely outperform the stock market during the next recession. Also, at this point I would loan money to prime P2P borrowers rather than buy bonds. That being said, I wouldn't invest more than 50% of my net worth in loans, for the sake of diversification.

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Re: Just started with P2P lending (Mintos). How risky is it?

Post by Valuethinker » Fri Oct 11, 2019 7:33 am

hithere wrote:
Fri Oct 11, 2019 7:13 am
P2P lending can be a good investment if you pick your platforms, originators and loans carefully. IMHO, this type of investment receives more bashing on the forum than it deserves. I think that a good portfolio on Mintos will likely outperform the stock market during the next recession. Also, at this point I would loan money to prime P2P borrowers rather than buy bonds. That being said, I wouldn't invest more than 50% of my net worth in loans, for the sake of diversification.
Banks are lending to individuals and businesses at 4-8%? (in the UK)?

If borrower has home equity less than that.

What sort of borrower is paying 12% on a peer to peer loan?

I wouldn't put 50% of my net worth into this. Maybe 10%? You could probably make a case for 20%.

Beware Ponzi borrowers - borrowing to pay back other loans & interest. Banks have huge portfolios of loans to average out wins & losses. You do not necessarily have that ability in P2P. And your loans will likely be going to the bottom end of the credit spectrum? So the correlation risk is high - the default risk of the loans is not independently distributed, but will correlate, especially in an economic downturn.

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Re: Just started with P2P lending (Mintos). How risky is it?

Post by David Jay » Fri Oct 11, 2019 8:44 am

minimalistmarc wrote:
Sun Oct 06, 2019 9:10 am
1% if your portfolio , 25 euro/loan , don’t bother. Too much admin, extra tax calculations and for something that won’t affect your net worth long term.
This is exactly right. 1% of your portfolio will not provide enough benefit to be worth the effort.

If you actually receive 8% average after defaults (questionable) and are going from 0% (bond money into P2P), your annual gain is €80 per €100,000 of portfolio value.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Re: Just started with P2P lending (Mintos). How risky is it?

Post by hithere » Fri Oct 11, 2019 10:02 am

Valuethinker wrote:
Fri Oct 11, 2019 7:33 am
hithere wrote:
Fri Oct 11, 2019 7:13 am
P2P lending can be a good investment if you pick your platforms, originators and loans carefully. IMHO, this type of investment receives more bashing on the forum than it deserves. I think that a good portfolio on Mintos will likely outperform the stock market during the next recession. Also, at this point I would loan money to prime P2P borrowers rather than buy bonds. That being said, I wouldn't invest more than 50% of my net worth in loans, for the sake of diversification.
Banks are lending to individuals and businesses at 4-8%? (in the UK)?

If borrower has home equity less than that.

What sort of borrower is paying 12% on a peer to peer loan?

I wouldn't put 50% of my net worth into this. Maybe 10%? You could probably make a case for 20%.

Beware Ponzi borrowers - borrowing to pay back other loans & interest. Banks have huge portfolios of loans to average out wins & losses. You do not necessarily have that ability in P2P. And your loans will likely be going to the bottom end of the credit spectrum? So the correlation risk is high - the default risk of the loans is not independently distributed, but will correlate, especially in an economic downturn.
Most of the originators on Mintos are from Eastern Europe. That's where I live, and in my country the average interest rate for bank loans with no collateral is 10.4% at the moment. These are bank clients, i.e. prime borrowers - people with stable income and good credit history.

With regard to the subprime market, there are companies that were doing just fine during the last recession. If you're investing with an originator that knows how to manage the risks, then in the event of a recession your investment shouldn't take much of a hit. One of these risks is the said Ponzi borrowers, and the good loan companies know how to weed them out and/or take them into account.

50% is the max I would invest. Currently, I'm at about 20-25%.

renue74
Posts: 1760
Joined: Tue Apr 07, 2015 7:24 pm

Re: Just started with P2P lending (Mintos). How risky is it?

Post by renue74 » Fri Oct 11, 2019 11:00 am

I used Lending Robot and invested about $10K a few years ago. The advertised rates of return are higher than expected.

But, I will say, I have not had a lot of loan collection issues. But...as one said here before....these types of loans are the last to get paid in a bad economy. Unsecured debt.

I'm slowly unwinding from them now and don't plan to invest any longer. I take my monthly payouts and invest back into the market.

rich126
Posts: 879
Joined: Thu Mar 01, 2018 4:56 pm

Re: Just started with P2P lending (Mintos). How risky is it?

Post by rich126 » Fri Oct 11, 2019 11:03 am

I'm not sure about Mintos but this has been discussed on some other sites and the people who have done it, indicated that their net gains tend to be in the 5-6% range. It wasn't worth it for them to continue.

Try it with a small amount that you don't mind risking/losing and see how it goes. The gains are somewhat offset by losses.

I think if there were sizable gains to be had, bigger money would move in.

Rich

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