Would I invest 127k EUR in P2P platforms like Bondora, Mintos, Twino?

Received an email from Mark, who asked for advice about investing in P2P platforms:

Basically, ~127k EUR is sitting around and not working. I do have Bondora and I was one of the early investors in 2012 when it was called Isepankur. Problem there is I don’t understand what’s going on there-it is displaying my ROI as 15% but everyone is saying that it’s not real because they don’t calculate defaults correctly and real returns are ridiculously low.
Considering all of the above, do you recommend investing in Mintos and/or Twino?How would you suggest getting enough math skills to be able to figure out what’s going on with my account at Bondora, how to calculate XIRR(not sure?) etc.
If not Mintos/Twino, what passive strategies would you recommend to put the capital I have sitting idle to work.

I am not a financial adviser, but can share my opinion. And if you have invested in any of P2P platforms, would be glad to hear about your strategy and results so far in the comments as well.

Bondora

I have not done any tests with Bondora, because their loans don’t have guaranteed buybacks. If the largest P2P platform in the world has done some shady stuff, I would not be suprised if smaller platforms repeat similar actions. For this kind of platform to make money, they need lot of loans to be funded and that might motivate platform owners to “improve” their loan scoring models and make everything look much better than it is, specially – if they don’t take any risk themselves.

So I am staying away from Bondora and would not recommend to invest there. Even if I trusted their management completely, it just does not make any sense to get 10% return they promise if I can get the same results from other P2P companies but with additional buyback guarantee.

Twino

Twino had a very promising start – 14% interest rates, guaranteed buybacks and P2P company was combined together with Finabay that issued loans. For more than a year everything was very stable – my money was invested, just needed to lower min interest rate in my Auto Invest portfolio once in a while. In the end I had set it to 10%, but it still seemed reasonable.

Situation changed in the last 3-4 months – for some periods money was not invested. As the situation was not that bad (about 10-15% not invested), I did not change anything.

twino_loans

But 3 weeks ago on April 28th Twino unexpecedly fired a lot (some say even 50%) of their employees, possibly related to new regulations in Georgia (their largest market) and Denmark, and then I decided to sell all my loans and withdraw all the money from Twino.

These kind of unannounced issues is exactly the reason why I invest only in short term loans – so that if I hear bad news, I can cash out quite fast and let others with longer term loans try to figure out, how bad the situation really is and if the P2P platform will later be able to provide promised buyback guarantees.

Mintos

I have mixed experience with Mintos – in the beginning of 2016 I invested in short term loans only, but there were more investors than loans, so big part of money was not invested and produced about 8% return. Was not happy about it, so just bought some other longer term loans, but after a while decided to be more disciplined and sold them in secondary market. And as there were not enough short term loans (up to 50% of money was not invested), in July 2016 I just withdrew all the money.

But as Mintos was adding new partners quite fast, after a while I decided to try them again in February 2017. I had to decrease min interest rate to 11%, but since then almost always money is invested. And if in 2016 I was buying only Cream Finance loans, then right now I am invested in loans from already 4 companies: Cream Finance, Lendo, Banknote, ID Finance.

My current portfolio is set to invest in 11+% loans with term: 1 month, buyback guarantee and after hearing the bad news about Twino, I also excluded Georgia and Denmark from country list:

Swaper

I got an offer to try out Swaper.com when they launched in the end of 2016, and they promised 12% return + additional 2% for early investors. I invested some money in October 2016, but quite soon run into some issues.

Reports were not correct – some loans had status “closed”, but with 0.00 interest income. Support said – there is a bug in “My Investments” section, and that I should instead look at Account Statement that has all the missing interest payments.

I did that and found out about another issue – for some loans that were extended, I received the principal and interest for loan extension, but did not receive interest for the loan:

And that of course influenced the overall return. After 2 weeks this bug was fixed.

But similar to Twino, in last 3-4 months also Swaper has bigger interest from investors than loans to invest in, and lot of money I get back from previous investments, is not invested again.

So I decided to sell all my loans and cash out here as well. I might test Swaper later again, but then would expect to see not only enough loans available, but also more info in website about company management. Right now website has social icons,  but only FB is active. It is not possible to view stats of an individual loan. No info about people behind the company. In short – Swaper does not provide many reasons to trust them with my money.

Viainvest

Viainvest is the newest P2P platform from Latvia – I invested some money in March 2017, and since then it seems to be working fine:

And right now there are still 14 pages of available loans, so that is good:

But as we can see from other examples, in couple of months that might change, so I need to check it once in a while.

Investing or speculating?

Consider this, before you send any money to one or several of mentioned P2P platforms:

  1. P2P platforms are not regulated and if they get hacked, go bankrupt or try to scam you, you can loose all your money. Your money is not protected in any way. Guaranteed buybacks sound nice in theory, but can fail in practice.
  2. This is not a stable bussiness. Most of loans available in these platforms are short-term loans with 50-150% interest rates for borrowers. In some countries regulations are so strict that these kind of bussineses cannot exist there, in other countries similar policies might be implemented as well.
  3. Almost all P2P platforms are hiding something – things they don’t want investors to know about, for example:
    • Mintos and several of its partner companies are partly owned by the same investor. More info here: “Peer-to-Peer Lending Platform Mintos Independent Review“. If you look at Mintos page about Loan Originators – in 2 cases they mention “Lendo is a related party to Mintos as per IAS24 definition.” and “Banknote is a related party to Mintos as per IAS24 definition.“, but not for all related companies. Why is it important? If one person controls both Mintos and many of its Loan Originators, then dividing your money between several of them with goal to diversify might not work like you expect it.
    • Just 2 weeks ago Twino fired big part of their team and they have several hundred people working for them, so it is not a small thing. Could it be so serious, they might shut down or have issues with paying back investors? Probably not, but to hear about it from people close to company and not from CEO, and then seeing that their phone support is not working at all, makes me question, if it is wise to invest there. It is quite clear that if they would be in a very bad spot, investors would be the last ones to find out.
    • Swaper is super secretive by default – almost gives an impression they are preparing for shutting down at some point with no consequences to owners, as no one would even know – who is behind the site.
    • Bondora misleads investors and their stats don’t match with reality. More details here: Why I am lowering my portfolio at Bondora (Feb 2016)
  4. P2P is not passive investing. Even if you use Auto Invest portfolios – all platforms make so many changes and often don’t have enough loans to invest in, so XIRR, Net Annual Return and other metrics are not very useful. They might look good, but don’t represent the actual returns, because at least part of time part of your money will be frozen in these P2P platforms without generating any return. You need to follow status of your investments, update settings or in some cases – just withdraw money and move it elsewhere.
  5. Taxes can be a nightmare. I asked 4 platforms for advice – how should I calculate and pay taxes. Got different answers – 10%, 23% and in one case – depending on which loans I invest (CZ 15%, ES 19% ES) and I might get to additionally pay the difference between these countries and LV tax rate. Mintos consulted with State Revenue Service, their view: if you invest in more than 2 loans per year, you need to register as person who is doing economic activity (“saimnieciskās darbības veicējs”), and pay 23% tax.

If these points don’t make you worried, go ahead – try it out, but be aware – that it would be hard to call it “investing”, it is closer to speculating and gambling.

Would I invest 127k in P2P platforms?

As someone with high risk tolerance I have no problems with buying Bitcoins, options, leveraged ETFs and risky stocks that some times go to zero. BUT – if I had 127k in cash, I would probably not invest more than 5% of it in one Loan company. And my Auto Invest settings would be: max 1 month, buyback guarantee only. In short, I would consider investing in these loans:

Max Amount Loan Originator
6350 EUR CreamFinance (Mintos)
6350 EUR Lendo (Mintos)
6350 EUR Banknote (Mintos)
6350 EUR ID Finance (Mintos)
6350 EUR Viainvest

So I would avoid Bondora, Swaper and Twino at least for now. And all the other Loan Originators in Mintos platform (unless they add new ones with required terms). And I would not mix up any lenders in Mintos – split each one in their own portfolio, and if any of them don’t have enough loans – then drop them and cash out.

So 32k into P2P, what about the rest?

  • I would consider converting 10% of cash (or 12,700 EUR) into physical gold.
  • I would consider buying stock sector ETFs like $URA, $TAN and others that have lost lot of value in last couple of years. Again – not more than 5% in each.
  • For the money that is left and unused – I would buy Vanguard Total Bond Market ETF $BND – it is a safe investment with low return, but might cover inflation and can easily be converted back in cash if better opportunities show up.

Warning

I have no formal education in finance and I am in no way qualified to provide investment advice, so take all of these ideas with grain of salt and decide for yourself. Remember, that it is your money and you will face any consequences for the investment decisions you make.

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18 thoughts on “Would I invest 127k EUR in P2P platforms like Bondora, Mintos, Twino?”

  1. Hi, thanks for sharing all your ideas about the current P2P state. Can I ask where have you heard/found info about reducing employee in Twino?

    From my point of view, Twino suffers from a lack of new loans for a long time. Whenever my money sits in the account without usage, I reduce my portfolio.

    So your information on possible issues on the platform is the next reason why to do the complete withdrawal.

    PS: On the other side, there will be a lot of 12% loans now 😉

    1. Have to fix the post – it happened 3 weeks not 2 weeks ago. They did the mass firing on Friday, April 28th just before holidays (Monday, May 1st was not working day in LV) – that is when I heard about it first time, but later got the same info confirmed by 2 other friends. In all cases source were people, whose friends were fired.

      1. Thanks for more details. I just finalize selling all my investments and asked for withdrawal. Hope there will be no problems.

  2. From what I gather from your post Mintos and Viainvest are the only one that’s really worth investing in? Do you recommend making withdrawals or reinvest everything? You have One Hundred Thousand Euros at Mintos? I didn’t think people are putting that much into those things=]

    1. Besides Mintos and Viainvest there are probably more P2P sites where it would be worth to invest, but I just have not done lot of research and tests. My experience is limited to the companies I mentioned. I would reinvest everything until you feel the need to withdraw everything. I have only 5k in Mintos, here is full screenshot: https://www.dropbox.com/s/qc7g1hrwu1pzav5/Screenshot%202017-05-20%2011.20.53.png?dl=0 – if I had more, then I would split it between several portfolios like I suggested in this post.

  3. regarding the point : Almost all P2P platforms are hiding something – VIAINVEST , there was
    a chat between some user and support from viainvest, (I think it was on p2pindependent forum) and the was pointing that the owner of viventor is behind viainvest.
    He was comparing some juristic documents viventor and viainvest and they were almost the same so apparently they were created the same law agency.
    I will check it and try to post it here.

  4. I also got a little more aware of the situation after finding the post on Twino firing. Also tried to look for more information and both P2P platforms (German & English) seem to be claiming they also heard rumors about Twino firing quite a considerable amount of staff. It’s a little surprising Twino officially did not communicate any of this whatsoever leaving a number of investors “hanging” and anxious. So I’m not surprised many of them (myself including) simply withdrew the funds.
    Just wondering – I’ve also heard some rumors about Twino Polish funds being withheld due to tax disguise. Do you by any chance have more info on this & how correct is this info?

    1. Hi, no – I don’t have any info about Polish funds being withheld, but you can ask about this in a Facebook group called “Twino Fellows” – Twino CEO is there as well and usually is fast to respond.

  5. Great post, thank you!
    Regarding Twinos, I have heard recently from the former staff and people connected to their company, that they are experiencing huge overhead and operational expenses due which massive dismissal mentioned in your post could be justified. Sad that they are a private organization and there is no direct access to their financial statements to check out what’s happening there behind the scenes. Well yeah, this isn’t good news and I’d better also stayed out from them, as this is not the best signal for the long-term investment.

    “I would buy Vanguard Total Bond Market ETF $BND” – could you cover how to approach Vanguard in Baltics or Latvia, to be more specific? I believe it could be an awesome idea to compare local banks’ ETF services, Vanguard and other more shady alternatives for investing in S&P500 or other indices, that could end up in the very interesting reading.

    1. I don’t plan to use local banks for investing, they have the highest fees and very often also limited service/features. I’m using Interactive Brokers for options, stocks, bonds.

  6. Hi Kristaps,
    I just logged on to Mintos and I see a bunch of Georgian loans offering 17% with buyback guarantee. I am not limiting the loan term to 1 month though, I can invest for long time periods. But you mentioned Georgia and Denmark are problematic. Can you elaborate on what exactly is the problem? Is there any risk if I stick to loans with buyback guarantee and if so, where exactly is the risk? Thanks!

    1. 1) these 17% loans are probably not in EUR, but in GEL, right? Then take into account currency risk as well. In 2012 1 GEL = 0.5 EUR, now 1 GEL = 0.37 EUR, so it has lost about 30% in value against EUR in 5y. If you had invested in GEL in 2012, you would need to get +30% return just to break even, without fees when converting currencies.
      2) problem = regulation. These type of short term loan businesses can stay alive as long as they are allowed to ask their clients for yearly interest rates ranging 100-3000%. If a limit is set on that, then also their ability to profit, advertise etc. and stay alive is limited as well. Have not researched it, but heard from people working in this kind of companies, that they expect most of lending companies in Georgia to close.
      3) additional risk = owners/investors. Recently there was a report that main investor/owner of Mintos (who is also main/one of investors of several loan originators in Mintos) together with CEO/owner of Twino.eu had a company in Russia – Optitrade24 – that was offering binary option trading and promised investors no downside, and later scammed the investors and closed everything. I am a bit surprised about this, but as I don’t plan to be the next idiot, I am withdrawing all my P2P investments, and staying away. Too much shady stuff going on in the background. More info in Latvian here: http://www.lsm.lv/raksts/zinas/ekonomika/pazistams-uznemejs-no-latvijas-iespejams-bijis-saistits-ar-vietni-kura-zaudejusi-naudu-krievijas-iedzivotaji.a242017/

      1. Yes, my bad the 17% ones are in GEL. I did a filter for EUR only and buyback guarantee-Yes and I am still getting 18489 loans, starting with hundreds of Mogo car loans @13% interest.
        So it seems like considering buyback guarantee *which* specific loan you buy is not important? The originator is important(i.e. if there’s bad news about an originator-avoid) but which individual loans you buy is unimportant?
        If I understand you correctly, the only risk is if the originator will run away, file bankruptcy, or otherwise not be able to honor the buyback guarantee?

  7. Hey Kristaps, big fan of yours! Sorry haven’t found how to contact you.

    Can i ask you, to make an article, about loans and credit cards comparison between different banks?

    In Estonia right now, it is not the best APR on loans and credit cards, and the banks make a lot chunk of money here. Would like to hear and know your opinion, where it would be better in your opinion to lend money in Europe – banks,platforms, etc.

    Much appreciated
    Silver

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