Risk You Are Facing on Mintos

This is an easy question with very difficult answer. For one investing 1,000EUR will be too much for another investing 100,000EUR will be OK. First, it would be good to understand what risks are associated with investing on Mintos:

Credit Risk

  • Loan originator – loan originator represents the biggest risk in the whole chain of involved entities. In case the loan originator defaults, you have is no protection on the investments. Usually, you can expect some of the investments to be repaid eventually (e.g. in the liquidation), but it might take much longer than the term of the original investment and the amount you get back can be anywhere between 0% and 100%.
  • Borrower – when you invest in loans with buyback guarantee, you effectively eliminate this risk. Even when the borrower defaults, loan originator will still pay back the investment and accrued interest rate.

Currency Risk

I will assume that you invest primarily in EUR. If your primary currency is different, you are running currency risk where the exchange rate might significantly change between your base currency and EUR.

Operational risk

The biggest operational risk is that Mintos will shutdown its operations. However unlikely this might sound it is a risk that you have to be aware of. Despite the claims of Mintos on this topic (see here), if Mintos would close its website, it might be challenging for you to get to your money. Not to mention that such event could harm lenders whose funding is significantly tied to Mintos (they would not be able to fund new loans anymore).

Interest rate Risk

Although not really mentioned in last few years much given the extremely low interest rates everywhere, it is a valid risk you are facing. Should the interest rates go up and you will get stuck with your long-term loans on Mintos, your investment will be less attractive from risk/reward point of view as the spread between risk-free investment (e.g. government bonds) and interest you are getting on Mintos will be lower

How much to Invest?

When you understand what risks there are, you need to figure out answers to few questions in order to determine how much you should invest:

  • How much money I can loose completely and still be OK with it?
  • How much money I can set aside and still have enough for my needs, including necessary cash reserves?
  • Do I have other investments with higher reward and lower risk?

So here goes my personal logic:

  • I am ok to lose 15% of the invested capital
  • From all of my non-fixed assets, I am willing to have up to 20% in P2P platforms
  • I would like to achieve 10%+ interest rate

You can see my diversification here.

Ready to create your own portfolio? Invest on Mintos today using this promo link and get up to EUR 250.

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