More than 2 months ago I did a stupid experiment - took out a 3000 EUR loan to invest it in Mintos loans. The upside was very limited - at best case I could make maybe 50 EUR, but downside was much bigger. So how did it go? Worse than expected.
Take a 3000 EUR loan on Feb 26th (interest free for first 2 months)
Invest these 3000 EUR in a Mintos test account for almost 2 months
Sell all Mintos loans in secondary market couple of days before April 26th
Repay my own loan until April 26th
What went wrong?
As I mentioned in my previous post, there are many risks involved with this plan, one of them:
Liquidity can disappear (problems with Loan Originators or a global downturn)
And this is exactly what happened - only 2 weeks later after I started this experiment, Covid-19 crisis started to have a huge impact on all P2P platforms - Loan Originators starting having problems and many investors wanted to get out.
Mintos actually did a survey about this topic, 2294 investors participated and here you can see the results:
How did it impact my plan?
Up till March 12th or so it was possible to sell Mintos loans to other investors with only 0.1% discount, but after that the situation with liquidity got bad very fast and to sell anything in Mintos secondary market, discounts of 5% to 15% were needed.
On top of that, Mintos also introduced a secondary market fee of 0.85%.
So when I sold most of my loans on 23rd and 24th of April, these are the discounts I needed to use:
With discounts up to -3%, I managed to get €500
With discounts up to -7%, I managed to get €1528
With discounts up to -9%, I managed to get €2241€
With discounts up to -12%, I managed to sell everything
My test account on April 23rd, right before selling loans:
And how it looked like 1 day later, after selling all loans:
So instead of making €50 I lost about 3x more: €147.15
Do not borrow money for investing - it is a very dangerous and stupid idea
Even if Covid-19 would not have happened, the time spent and risks taken for a very small reward would not make sense
In an economic downturn even the biggest P2P platforms have liquidity issues
P.S. Join “High-risk investments“ Telegram group for an informal discussion.