P2P Lending – The Great P2P Experiment

What is P2P Lending? Well, with interest rates at an all time low and the banks potentially charging you to hold cash (negative interest rates), there’s limited choice outside real estate and equities.

p2p lending - crowdlending

It’s time to say goodbye to minuscule interest rates that the banks offer…welcome to p2p lending.

What is P2P Lending?

P2P lending is also known as crowdlending and is the practice of lending money to individuals or businesses. It matches lenders directly with borrowers, through an online matchmaking platform.
Where in essence…borrowers, borrow money online and lenders make money online, without the need for a bank.

Say Lars in Copenhagen wants to take out a business loan for a new venture he’s setting up, young Anastasia in Moscow wants to buy herself a fancy new car or Tomasz in Krakow wants funding to buy his first house.

Well, you can be the bank to Lars, Anastasia, and Tomasz…and many, many more of their compatriots.

What’s more, this new breed of peer-to-peer lending works by connecting investors with borrowers, via a number of loan originators. So, you actually wouldn’t be lending directly to Lars, Anastasia, and Tomasz. You invest partially in the loan they secure.

And here’s the sweetner…a chunk of these loan originators are backed by a buyback guarantee.

These loan originators can range from mortgage loans, secured car loans, small business loans and unsecured loans etc.

I really love the thought of helping a local business that lack funding.

The platforms I’m working with operate their lending in a diverse set of countries, such as Estonia, Lithuania, Georgia, Poland, The Russian Federation, Denmark, Mexico etc.

Peer to Peer Strategy

Before I commit to socking my money into p2p lending, I like to research the platform to minimize my risk.

  • Perform due diligence on your chosen platform. I read reviews from sites such as Feefo and Trustpilot, delve into their lending history and take into account their tenure in lending as a business


  • Use a tax protected account such as an ISA. For the moment, I’m testing the waters and will invest very little. Hence, the interest I make will not be taxable. However, if you intend to make peer to peer your focal point of income, then it could be worth using a tax wrapper


  • What sort of ROI (return on investment) do you want? Personally, I’m looking for 12%+. Although, the higher the percentage of return, the higher the risk AND fewer loans on offer


  • I’m looking to minimize my risk as much as possible. Hence, for 12%+ returns, I want to know the loans are attached to some sort of collateral. Or the platform buys back debt at a reduced price


p2p lending

  • Auto invest would be a key feature in p2p lending. I want to set up the key parameters for every loan and minimize time and risk


  • Diversification is also key. Just like dividend growth stocks, it’s best to spread your risk to ensure any defaults are minimized. My plan is to allocate the minimum loan amount, across as many loans as possible. I’ll also use various types of loans, across different countries.


  • Multiple platforms, to spread the risk…some platforms have folded in recent times. For example, some have been done for fraud so just be careful. Here’s an example regarding China p2p


  • Finally, I actually use peer to peer lending as an investment vehicle. Originally, I was only going to use as an Emergency fund. I use for both. Banks and premium bonds pay dismal interest, hence this is the new home for my 6-month stash/ savings.

I use 3 peer to peer lending sites at the moment (all Non-US). I do plan to build these funds over time.

But first, let’s concentrate on Mintos…the little Fintech powerhouse from Latvia.  I provide my Mintos review 2018 below:

14 Ways to Supercharge Your Mintos Portfolio

p2p lending
Auto investment key parameters, BEFORE case study…for Mintos Platform

I’m using one of my platforms as a case study, as in how to set up and tweak for optimum results (see ‘Mintos Case Study’ table below).

The aim is to increase the number of investments/ loans on your account, to diversify the risk. Whilst maintaining the ROI:

Let’s walk through each field on your Mintos Auto Invest Portfolio first:

Portfolio Name: This platform, in particular, will act as my emergency fund and investment vehicle.

1. Buyback Guarantee: All my loans are set to yes, meaning 100% of my loans have a buyback guarantee.

In other words, if the borrower defaults on the loan, the loan provider will buy this loan back from you
…including the interest. Hence, you can actually profit more from this scenario.

2. Portfolio Size: This is the size of portfolio I aim to work with (eventually). I envisage building the portfolio to this size after reinvesting income and additional contributions. All going to plan, I would skim a small percentage (dependent on how well fund has performed) per annum. This will act as a small percentage of my passive income.

3. Loan Originator: I decided to select all 13 loan originators, to maximise my diversification and thus reduce risk.
Always perform a weekly check on this parameter. Since set up, more loan originators have been added. So, ensure you add them to your portfolio.

p2p lending
Loan originators for Mintos Platform

4. Maximum Investment in One Loan: Initially, I chose the minimum amount allowed by Mintos (10 Euros), in order to reduce risk.
I increased this to 20 Euros per loan, in order to pump more money in my fund. Thus, more chance of increasing my net annual return.

5. Remaining Principal Amount: The bigger the loan, the higher the payment…and big payments are harder to make. However, statistically, return on investment is greater for longer loans. With a buy back guarantee, you will recoup your investment…and potentially more with defaults.

As part of the Case Study, I will define a size of the loan that I want to invest in. Then, I shall leave this field blank. In order to invest in ALL of the available loans.

6. Interest Rate: Mintos average ROI is 12.5% and just one of the reasons I chose this platform. So, 12% plus is what I aim to gain. However, by using a lower limit of 12%, you are missing out on other loan types.

As part of the case study, I shall lower the interest rate from 12% to 10% (to expose myself to more loans and less risk).

7.Maximum LTV: It’s a risk versus reward thing. I feel 70% is cautious but enough to provide a half decent return. However, I moved to 90%, as it restricted a number of loans I could invest in.

As part of the Case Study, I shall invest in unsecured loans. To ensure I get exposure to more loan types.

8. Remaining Loan Term: Losses can rise over time, hence there is more potential for defaults. With the buyback guarantee, you can profit from this. However…from the graph below, my thinking is 12 months is the optimum loan term.

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Average interest rate by loan duration (taken from Twino Statistics)

9. Loan Status: Initially, I wasn’t interested in late payments. Again I want to minimise risk. Hence I used current.

But then I moved to ALL, as in up to 60 days of late payments. This enabled me to invest in more loans. At the same time, Mintos buys back loans up to 60 days late. Hence, I’m, protected. But also profit on the late payments.

10. Loan Type: I selected all loan types…again, to diversify and minimize risk.

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Different loan types from Mintos Platform

11. Minimum Funds in the Account: A minimum amount of funds are required for auto investment.

12. Country: I selected all countries…again, to diversify and minimize risk.

Always perform a weekly check on this parameter. Since setup, more countries have been added. So, ensure you add them to your portfolio.

13. Amortization Method: An amortization schedule or method is a table detailing each periodic payment on an amortizing loan (typically a mortgage). It refers to the process of paying off a debt over time, through regular payments. I chose all types i.e. Full, partial, interest only and bullet. Again, to diversify and minimize risk.

14. Do You Want to Reinvest? You certainly do, you want your fund to compound over time.

The Mintos Case Study Plan

  • Tweak ONLY ONE of the parameters, at the end of each week (every Friday morning). For 5 weeks
  • Update the key parameters on the table, ‘Mintos Case Study’ below
  • Summarise findings for the week, below the table

Mintos Case Study

End of WeekParameter ChangeROINo. Investments/ Loans AvailableAccount Balance
1None12.09%41/ 31565€1011.39
2ROI (12% to 10%)12.09%41/ 31131€1012.08
3Add 3 Extra Loan Originators12.09%41/ 24920€1012.94
4Add 2 Extra Countries12.08%41/ 2590€1014.13
5Max LTV (leave blank)12.14%70/1945€1015.41
6Remaining Principle Amount (leave blank)12.09%70/2324€1017.04

Week 1 (Change ROI from 12% to 10%):

The idea was to get exposure to more loans (i.e.loans paying in the 10-12% range). It hasn’t worked out this way. Maybe there aren’t enough fresh loans on the market at the moment, or there’s more investors in the market.

Change since start of experiment:
ROI = No Difference
No. Investments = No Difference
No.Loans = -434
Account Balance = +€0.69

Week 2 (Add 3 Extra Loan Originators):

There were only 12 loan originators (out of 15) selected.
So, I added Banknote, Hipocredit and ITF Group. These are new loan originators Mintos has welcomed into their p2p platform.
You would expect to have more exposure to loans, with more loan originators added. However this was not the case.

Change since start of experiment:
ROI = No difference
No. Investments = No difference
No. Loans = -6645
Account Balance = +€1.55

Week 3 (Add 2 Extra Countries):

There were only 6 out of 8 countries selected.
So, I added Bulgaria and Denmark to the mix.
Again, you would expect to have more exposure to loans, with more countries added. This was not the case. But, I received my biggest increase in account balance. So, things are moving in a positive direction after minor tweaking, on a week to week basis.

Change since start of experiment:
ROI = -0.01%
No. Investments = No difference
No. Loans = -28,975
Account Balance = +€2.74

Week 4 (Max LTV: Leave Blank):

This was originally set at 90%. So, I left blank, so I could invest in unsecured loans.
At the moment, I have no exposure to these unsecured loans. However, with this LTV setting change, this will all change.
This tweak made the biggest difference in my portfolio so far. In respect to exposure to investments and ROI. More investments (unsecured) became available to invest in and my ROI shot up.

Change since start of experiment:
ROI = +0.05%
No. Investments = +49
No. Loans = -29,620
Account Balance = +€4.02

Week 5 (Remaining Principle Amount: Leave Blank):

This was originally set at 1000 to 12000 (Euros) i.e. invest in loans with an outstanding principle of 1000 – 12000. Now I want to invest in ALL available loans. So, this field is now blank.
This tweak made the biggest difference in my account balance and number of loans, from the previous week.

Change since start of experiment:
ROI= No difference
No. Investments = +29
No. Loans = -29,241
Account Balance = +€5.65

Earn 1% On Your Mintos Account Balance

If you set up your account through my link, you will receive 1% of the average daily balance, which is paid in 3 installments for the first 90 days.

For example, The Canny Contractor refers Sara (visitor to the canny contractor website), who starts investing via Mintos Marketplace. After 30 days the average invested balance Sara has had over the period is EUR 3,500, so Mintos will credit 1%
of EUR 3,500 (or EUR 35) into Sara’s investment account, and another 35 EUR into The Canny Contractor’s account.

After 60 and 90 days Mintos will review the average invested balance again and, if it increases, credit both Sara’s and The Canny Contractor’s investors account accordingly.


P2P lending is a great alternative investment if you have some spare funds but not a lot of time on your hands. Although, it does require some input and patience initially.

As you can see, it’s important to optimize all the parameters in your auto invest portfolio. To ensure a consistent ROI and healthy account balance.

Mintos has proven to stick to their word with regards to the ROI. It’s maintained a healthy 12%+ throughout the P2P experiment, over 5 weeks. And to this day.

It’s also managed to maintain that return on investment with Mintos taking all the risk (buyback guarantee).

It’s not always easy to get exposure to all the investments on offer. However, by tweaking the max loan to value, I was able to invest in unsecured loans and increase my overall exposure to the number of investments on offer.

The ROI was at it’s highest over the 5 week period during that parameter change.

A similar scenario occurred by tweaking the remaining principle amount. I was able to get exposure to all available loans on offer.

After experimentation, Mintos appears to be the best peer to peer lending platform I have in my portfolio. I will continue to use Mintos and this exact set up in my auto invest portfolio. It gives me the return and confidence I need to make a generous 12%+ return.

I provide a transparent overview of my Mintos account in every quarterly income report.

Fees for Investing in Mintos

UPDATE: As of November 2017, there are absolutely no fees for investing in Mintos. They recently removed the 1% fee for selling loans on the secondary market, of the Mintos market place.

Now I would like to hear from you.

What were your biggest takeaways? What sort of returns have you had with p2p lending?

Let us know in the comments…

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