Couple of months ago I wrote about peer to peer lending platforms in Latvia. After that I also decided to invest some money in them and came up with following strategy:
- No manual selection of specific loans, use Auto Invest feature to make investments automatically and avoid spending my time.
- Invest only in loans that have Buy Back guarantee.
- Even if Mintos and Twino have different returns for similar type of loans, invest in both of them to diversify and in worst case scenario loose only 50% of money in case one of these P2P platforms go bankrupt.
- Invest only in loans with the shortest term – 1 month – to get the best liquidity. So if I want to get back all my investment, it should take maximum 1 month for any remaining loans to be repaid, or in case – if some of them are paid late, then maximum another 1-2 months for the Buy back guarantee to pay back the late loans.
On December 7, 2015 I decided to invest 500 EUR in each of the platform with following Auto Invest settings:
Max. investment per single loan: 10.00€
Interest rate: 12.00% – 20.00%
Remaining term: 0 – 1 month
Buy Back guarantee: Yes
Loan providers: All
Investing in Twino
After I sent them 500 EUR, I set up following Auto Invest portfolio:
And this is how the main dashboard looked like – as you can see, all 500 EUR were invested the same day:
Investing in Mintos
Just like in case above, I sent 500 EUR to Mintos and created Auto Invest portfolio with the same settings:
After I set up my portfolio I tried to verify that there are available loans that match my Auto Invest portfolio settings. To my surprise – there were none:
But just week ago (on November 29) there were 736 loans available when doing similar search:
Even if I could not find matching loans, I decided to keep the Auto Invest portfolio active and don’t change any settings, so in case suitable loans become available again, then platform would invest in them automatically.
And that seemed to work, after some time I saw the first investment:
And later the same day I checked the account again, and all 500 EUR were invested:
Investment results after 2 months
As you will see in screenshots below – in Twino all the funds are invested, but in Mintos account there are 176.77 EUR still waiting for suitable loans.
Mintos summary after 2 months:
Twino summary after 2 months:
While return rates for short-term loans in Mintos and Twino platforms are quite similar (12-13%), the actual returns have big difference – I have earned €6.77 from Mintos and €11.17 from Twino.
The issue with Mintos is that there are not enough new loans that match my Auto Invest portfolio settings and that results in 0% return for some of the money, that is not invested and waits for suitable loans.
Of course, 2 months is a very short term and situation might change in both platforms in future, and I will update results later as well.
|Investment on 07.12.2015||€500.00||€500.00|
|Account value on 07.02.2015||€506.77||€511.17|
|Interest rate in dashboard||12.34%||12.9%|
|Return rate (from 2 months)||8.1%||13.4%|
|Interest sum (from 2 months)||€6.77||€11.17|
Should you invest in P2P loans?
If you consider this type of investment, I would recommend to read my previous post about P2P lending platforms in Latvia, invest in several platforms and create similar Auto Invest portfolios, but also take into account – that these platforms are not regulated and you can loose your investment.
If the loans you invest in have Buy Back guarantee, then the highest risk is for the P2P lending platform to go bankrupt, and that can happen because of many reasons – bad management decisions, competition or scam.
Latest example of huge scam in this sector comes from China:
Among China’s almost 3,800 P2P firms operating in the sector now worth of 133.1 billion yuan ($21 billion), more than 1,200 are in trouble, either running away with investors’ money, or closed down.
That included the largest P2P lending company in China – Ezubao:
Chinese police have arrested 21 people involved in the operation of peer-to-peer (P2P) lender Ezubao, the official Xinhua news agency said on Monday, over an online scam it said took in some 50 billion yuan ($7.6 billion) from about 900,000 investors.
I am not saying that we should expect something similar in Latvia or Europe, but as the number of P2P lending platforms grow, most likely some of them will fail. To minimize this risk, spread your investments across Twino, Mintos and other platforms that have either Buy Back guarantee or where the loans are secured against real estate.
Update @ Mar 15, 2016: Twino has changed rates
On Feb 19, 2016 Twino reduced rates to 10%:
Starting from February 19, 2016, all new loans on TWINO will be offered with a flat rate of 10.0% p.a. irrespectively of the country of origination or loan duration. The change is applicable only to the newly listed loans and will not affect the loans listed or sold on TWINO prior to February 19, 2016.
On Mar 11, 2016 rates for Georgian loans were increased to 12%:
We are increasing the rate for Georgian loans to 12.0% per annum starting from today.
The new rate will be applied only to the loans listed on TWINO starting from March 11, 2016, and the first loans with the increased rate will appear on the platform later today.