Hello, in this post I will be going through my rules when picking loan originators. With this I want to lessen the risks I am exposed to while still retaining the high returns. Of course we still want a decent list of companies since diversification is a big part of de-risking the portfolio.
I will try and keep my list up to date as regularly as possible! LAST UPDATE: 15/01/2020
- ExploreP2P rating > 50
- ExploreP2P Capital score > 10
- Mintos rating of B- and higher
- Loans with a term shorter than 6 months
- Current loans + loans in grace period = 70%+
- Buyback guarantee
- Interest on delayed payments
The ExploreP2P website is a very good website to check on loan originators. They keep a list of all the lending companies on Mintos and give them different scores based on there financial statements. They probably put a lot of time in this so go and check them out!
If decided to include the scores in my set of rules. The overal ExploreP2P score must be higher than 50 and the capital score must be higher than 10 as well. This will make sure I pick decent companies which have a decent amount of capital as well. This way I’ll be more certain that they can provide the buyback guarantee.
Mintos has there own ratings as well. Ranging from D (Default) to A+. I’ve chosen to only pick companies with a rating better than B-. In this case I was in luck because all the companies which have a ExploreP2P score higher than 50 also have a Mintos rating higher than B-.
Loan term < 6 months
This is a rule I specifically chose for myself. I only want loans with a term smaller than 6 months. This way when I want to cash out and the secondary market is not liquid enough I will have all my money back maximum half a year later.
If you have no issues with taking loans for a longer term, go for it! There is absolutely nothing wrong with it and chances are you will get better yields.
Current loans + loans in grace period
On the Mintos statistics page you can check out what state the loans of all the lending companies are. I want loan originators the be good at giving loans to people who pay the loan back AND do this on time. This way I am more certain the business will be profitable in the long run as well.
To check this I take a look at the percentage of loans which is in the current status + in the grace period status. The higher this percentage is the more loans that get payed on time the better the business is at screening for the right people. I want the sum of these percentages to be 70% or higher.
This one speaks for itself. Only pick loan originators that do offer a buyback guarantee. A buyback guarantee means that if the loan doesn’t get payed back the lending company will step in and will make sure you get your money back.
Interest on delayed payments
My last rule is that the lending company must provide me with interest on delayed payments. This means that of my loan does not get payed back in time and I have to wait for my money, I will still earn interest on in! A little side note here: Loans are delayed once they go through the grace period. This is a sort of in between state. This also means that if the grace period of a certain company is longer you won’t earn extra interest during this longer grace period. Take a look at the grace period of a company before adding it to your list so you can chose for yourself whether you think this period is too long.
Mogo: Excluding Estonia. Georgia. Moldova. Armenia. Belarus (no interest on delayed payments)
Creditstar: Excluding short-term loans (current + grace period <70%)
Placet Group: Excluding Lithuania (current + grace period < 70%)
Creamfinance: Excluding Latvia (no interest on delayed payments)
Kredit Pintar: Excluding short-term loans (current + grace period <70%)