It would be magical if I could go to the gym, play badminton and sometimes visit sauna and didn’t have to spend my money for it. I would only need 30€ every month for this. So I decided that I will invest and make my money work for me, finally.
How could I do it, was my first and the most crucial question I asked myself. I was looking for something on the internet, however I was always too sceptical and cautious about my money. I was looking for something to learn more about investing and something where my money would get me more money.
It’s called Peer to Peer lending. The idea is that instead of borrowing money from a bank for 9%, you can borrow it from people for 6%. These people (investors) would have their money doing nothing in a bank account, so they are willing to lend it to you for lesser interest, let’s say 5%. In this way both sides of a deal are happy. Borrower saves money and Investors can start using their money to earn some. There is always a fee for the server to mediate the loan, screening and fraud detection.
At the beginning of this year, 2017, I saw a lot of commercials for Zonky and I knew that some of my friends, who were in similar situation as me, are already investing there. Although I didn’t have almost any former knowledge about Lending money I thought that this could be perfect start to both start investing and learn something about me. How I handle the stress and emotions which are highly important when dealing with any amount of money.
At Zonky you can start investing from 200Kč (8€ +-) so it’s very easy to begin. The registration is fairly easy and I had no problem with it whatsoever. At first I only send there 2000 Kč (80€) to try it out and to test myself. Investing in your first loan is easy. You simply choose one on a Market (you can filter it based on interest, length and other criteria) and then you select, how much money you want to invest in that particular one.
I strongly recommend to invest the lowest possible amount (200Kč) as you want to diversify your portfolio. If there are enough people who would invest in the same loan as you did, then the loan is granted and Zonky will send the money to the client. After then you will receive payment from them every month. It consists of principal + interest. Each loan has a rating raging from A** all the way to D. A** is the most secure one (with the smallest interest) and D is very risky but with significantly higher reward. It’s purely up to you in which loans will you invest and all of us have different methods. Personally speaking, I am quite conservative so most of my portfolio is based on A ratings.
I liked the idea behind P2P Lending and discovered another project, Mintos. This platform is far ahead in development compared to Zonky and you can really experience the difference. This company is based in Latvia nevertheless they mentioned multiple times that they might move to England to stabilize on the market.
The main difference is that on Mintos you don’t invest into specific person. Instead you invest into other companies who are providing loans. So in the worst case scenario that Mintos would go bankrupt you are not going to lose all your money but they are still in the loans in those companies. The total number of loan originators is currently 27 which is great because you can invest only in those companies who you trust.
Another benefit is that you don’t have to invest only in one currency. You can choose among 8 different currencies including EUR, GBP, CZK, SEK and others.
How it really works?
- Borrowers apply for a loan at the loan originator.
- The loan originator evaluates the application, sets an interest rate and lends money from its own funds.
- The loans are then listed on the Mintos marketplace, where you can select loans to invest in, thereafter receiving monthly payments and interest.
There are multiple things I personally like about Mintos. However the one that really convinced me is that it offers a BuyBack Guarantee on some loans. If this loan is more than 60 days after its due date the loan originator will automatically buy it back and will also give you the interest you shall get from it during that period. Basically this means that you don’t have to care whether few borrowers stop paying because you will get your money back + interest. Simply perfect. Of course there is still a risk of loan originator going bankrupt. However it’s not common for those big companies to go down.
Zonky vs Mintos
Honestly I didn’t like Zonky that much. For me it’s just too personal, I don’t want to feel bad for not investing into someone who really really needs a car, but I know that if he manage to pay the debt, it would be a small miracle. I started to invest with the goal to earn some money. And for this reason I strongly recommend Mintos. They just look more serious. I still have money in both, but majority of my finance in p2p loans is going to be invested in Mintos rather than Zonky.
If you would like to join the community (50k + investors already) on Mintos, you can to it through this invitation and you will get 1% bonus for the next 3 months – link.
First I am going to add an article about how to register at Mintos.
After that I will share with you how am I doing so you could also see some real numbers. I will also share with you the amount of money I decided to start investing with, so you could see that you don’t have to have much. The important thing is to start. On Mintos you can start investing with 10€.
And finally I will show you how to set up AutoInvest so it will invest in those best loans even while you are doing something completely else.