Investing in Car Loans through Mintos

Mintos claims to be a platform that makes P2P financing easy. If you create an account and get access to the Mintos platform, you can invest in various forms of loans or create your own portfolio of fixed income securities.

If you dive into the details, you will discover that Mintos is actually not a peer-to-peer lending platform. Between you and the individual or small business that you would be funding, is not only Mintos but a loan originator. And you, as a user on Mintos are doing business with the loan originator and not the individual.

This is not a negative thing, though. Mintos is set up in a way that the originator still has Skin in the Game. The originator acts as a buffer by taking being responsible for some level of defaults. The originator can set how much security he is willing to offer the investor and investors on Mintos can filter loans by credit ratings as well as if the originator is offering a buyback guarantee.

Interest Rates and Default Rates

Mintos is a great concept, but as an investor, you should be aware of what you are buying. If you browse through car loans at Mintos you will find that most car loans are yielding around 9-10% in annual interest rate (primary offerings). At the same time, the person taking the loan is, in most cases, paying more than 30% in annual percentage rate.

What this means is that these lenders most likely have nowhere else to go, in terms of financing. This also means that these loans are quite risky and most likely have a high default rate and cars are costly to recoup when defaults occur. This explains the extremely large spread between the originator rates and the financing rate on Mintos.