Lower Interest Rates on Mintos

You may have noticed that interest rates dropped significantly on Mintos in August. This is especially true for loan types with higher interest rates like short-term loans, car loans, and personal loans.

If you look at the loan book, it looks like there has been huge repricing happening in August. In the picture below there is total loan amount by month and interest rate bin (by 2 points) for all EUR loans with buyback guarantee with rating better than C and only car loans, personal loans, and short-term loans.

What is visible is that month-over month (July to August) most of the interest rates dropped by one bin (2%). While this might be driven by lower demand I am more inclined to believe that Mintos is trying to push their margin up by lowering interest income for investors.

New Metric in Statistics

I added new cool metric to my statistics page – Implied IR. This is my estimate for the annual return on the invested balance. Compared to ADI% and ADB%, this goes a little bit further. First, the time-space is better aligned. By comparing interest earned in current month to end-of-month balance of previous month it is much more stable and usable metric. If you assume that you are fully invested (and I am running at 99%+ ADI/ADB) this is basically the return you get monthly on your balance (again, assuming you get interest monthly, what is mostly the case). By annualizing the return using (1+ Int/EOM Balance)^12 – 1) you get return estimate that assumes re-investment of the earned interested.

My Mintos page currently says my annual return is 11.98%. With my calculation I run a little bit higher at 12.76% for May/19.

My calculation (link opens new tab with my statistics):

It is good to know that Mintos calculation is somehow close to my own estimates. I mean, I don’t really care about the 0.7% difference. The important thing is that the annual return with earned interest re-investment can run at 12%. For me that is a very good result, especially when compared to my stock portfolio – there I target 12.5% annually, but the volatility is much higher. One day +5%, another -6%. This makes Mintos investment so cool – stable, above average revenue stream.

Strategy that is not working

For a while, I had auto invest strategy investing in short-term loans that have length between 1 month and 1 month. Why I would do that? I commented on this before – the short-term loans are cool, however the return is bigger on longer short-term loans :). Most lenders actually significantly under-deliver on the loans that are very short, like 7 days, or 14 days. Today, this actually stopped working and I wonder what has changed. My strategy is not picking any more 1 month loans anymore. I have question pending with Mintos support and will see what they have to say.

For me, it is unfortunate, as I prefer not to invest into loans shorter than 28 days and don’t really want 2+ months either. If you have some workaround let me know!

Added Funds to Mintos

Today I added additional ~ 19,000 EUR to Mintos, bringing overall invested funds to 145,000 EUR. This is because I have high confidence in Mintos business model. Currently, I have 25% of my liquid assets on Mintos platform. Mintos brings me reasonable revenues, and represents stable counterpart to my USD stock investment portfolio. I really believe and hope that Mintos will be around for next 10-20 years.

Staying Fully Invested on Mintos

One of the topics that I have not discussed before is the importance of staying fully invested. On Mintos, when your auto invest strategy is not set properly you may end up with significant portion of your funds unused.

Such situation is affecting your overall profitability on Mintos as measured against the total amount of money you have on Mintos. This is actually only the only metric that makes sense. Consider an example where you have $10,000 on Mintos overal, but only $1,000 is invested with %10 interest rate. This way you would end up with only 1% interest on the total amount you sent to Mintos, not really impressive.

To avoid such situation you need to keep checking Mintos for the balance that is not invested. Best you would like to $0 as your balance every day. This is not really achievable, but you can get close by having auto-invest strategy that is reasonably configured. This means that:

  • there are always loans that can be invested in (you need to sacrifice a little bit of interest income for this)
  • there is always some unused limit of the auto invest strategy

In my statistics I report two useful numbers – average daily balance (ADB) and average daily investment (ADI). To calculate ADB I will sum end of day balance for each day of the month and then take average. For ADI I will take sum of end of day investment for each day of the month and then take average.

Comparing ADB and ADI will give you good insight into how good you are in utilizing all of your funds. Best you would want for ADI to be equal to ADB. This is almost impossible, but you can get close. My statistics report on the ADI/ADB ratio to inform me how well I can utilize my money. Over last 7 months I have been able to stay above 98%. As an example, with interest rate of 11.5% on invested amount, interest on all my funds would be 11.27% (11.5% * 98%).