The 5 most important rules for investing in p2p loans


Rule no. 1: never lose money. Rule no. 2: never forget the rule no. 1 ", said entrepreneur, investor and philanthropist warren buffet when asked if he had any golden rules when it came to investing.

Investing is risky and it can be stressful and exhausting.

If you find the right medium and do things the right way, you can easily find yourself the proud owner of an independently passive income with minimal risks.

On mintos you can find all the important information about P2P loans.

What is P2P lending?

P2P is no different than an online financial dating service. People looking to borrow money outside of traditional banking channels list their vital statistics on a lending platform so interested investors can find their perfect match.

Relationships are closed, borrowers and investors can both "see other people" and then go their separate ways at a mutually acceptable time. Investors are usually looking for a new borrower for a short-term investment.

At reputable platforms like mintos, the suitability of borrowers is checked by independent financial institutions before the loan application is opened to investors. Their credit rating is checked and the likelihood that they will be able to meet their monthly payments is assessed to reduce the risk of asset loss and unhappy investors.

In essence, however, it is a similarly symbiotic relationship to dating. Every partner is looking for a way to improve their financial profitability. The borrower needs temporary funds, and the lender needs a way to improve income.

It's a mutually beneficial relationship.

Rules and what you should consider when calculating your income in P2P

As always, there's no easy way to calculate what an investment will bring, no matter what form that investment takes, but you can get a good idea of what to expect.

1. Check net yield

The net return is important so you know what you have left once all deductions have been made: your actual earnings for your efforts. While this doesn't take into account potential losses from defaults, it can lead to a fair-weather forecast.

Run the following equation to determine your potential net return:

  • Take the current value of your assets and add the percentage of interest stated.
  • Deduct the original value. Then subtract the stated fees that are likely to be incurred.
  • Divide this number by the original value and multiply by 100%.

This will give you your basic return, but for a real return you must also take into account the inflation rate for the investment period

The first piece of advice here is to only invest what you can afford to lose. No one ever likes to lose money, but everyone has a safety threshold – be it 20 or 200.000 € – so never put something you can not afford.

2. Diversify and spread investments

3. View standard investment platform policy

For example, mintos offers a standard payment guarantee. If the borrower you invested in doesn't make a payment, mintos covers that shortfall so you're always compensated.

However, this is not standard practice, and the higher the interest offered by a platform, the higher the risk of default is likely to be. So always read the fine print!

4. Plan for the long term

18 months is considered a peak time to assess whether an investment will work for you. In P2P you usually have the opportunity to have a complete credit cycle. If you do not have the time to control your own assets, mintos can support you.

5. Accept risk

P2P investments are not for everyone. Some people can tolerate greater risks. Some people want faster potential profits. Risk is omnipresent when investing in P2P loans.

It's important to never let feelings or emotions get the best of you. Always act in an organized and controlled manner.