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Foreign currency investments on Mintos

How will the exchange rate, exchange fees and time horizon influence your investments in foreign currency on Mintos? Read more below to find out: 

About foreign currency loans on Mintos

The P2P crowdlending platform Mintos has a lot of investments opportunities in foreign currencies with relatively high interest rates reaching up to 19.5%, but is it worth the risk investing in foreign currency like Russian Ruble, Georgian Lari, or Kazakhstani Tenge?
Mintos currently offers investments in 11 different currencies besides the Euro. The interest rates for foreign currency investments are often higher than the interest for investments in Euro. For example are loans offered with a 19.5% yearly interest in Russian Ruble at the time of writing this blog post, 18% for Kazakhstani Tenge , 18% for Mexican Pesos and 16% yearly interest for Georgian Lari. On the primary and secondary market, there are more than 23000 loans in foreign currencies and more are added daily.  The number is furthermore regularly increasing with more loan originators added to the platform from different countries. Some of the main reasons for considering investing in foreign currency is to get a higher yearly yield, while at the same time differentiating your P2P crowdlending portfolio with more currencies, countries and loan originators.

What factors influences your crowdlending investments in foreign currency?

Overall, there are three main factors influencing your crowdlending investments in foreign currency: Loan conditions, currency exchange fees, and development of currency exchange rates.

1) Loan conditions

The first factor is the loan conditions and how these conditions compare to other loans. How high is the interest rate, are there any loans available on the market or is there a cash drag so you money will just be idle on your account? Is it easy to exit the loan agreement on the secondary market, by selling your loans?  Are there buyback on the loans and after how many days?

You can read about the conditions of the loan originators offering loans in foreign currency on the official Mintos webpage.

2) Currency exchange fee on Mintos

The second factor is about the currency exchange fee. Even so, the interest might be significantly  higher in more exotic currencies like Russian Roubles, Georgian Lari or Kazakhstani Tenge compared to other loans. The currency exchange fee on Mintos will reduce part of the profit especially in the short run. When you exchange your money to a foreign currency and when you exchange them back to Euro you might lose several percentages in exchange fees. This is however no problem in the long run, if the higher interest rate as well as the development in the currency exchange rates can compensate for these fees, which leads us to the last influencing factor: 

Mintos currency exchange rates and currency exchange rate fees
A screenshot from the Mintos marketplace showing exchange rates and exchange rate fees.

3) The development of the exchange rate over time

The development of the exchange rate over time of the foreign currency you have invested in will also influence your investment. If your “home” currency is, Euros and you have invested in Rubles you will most likely sooner or later want to exchange your Rubles back to Euros. If during the period of your investment the Ruble gained value against the Euro, you will get an even higher profit, but if the Ruble lost value against the Euro, you will get a smaller profit or even deficit on your investment since you will be receiving less Euro for every Ruble you invested.

Many factors can influence the exchange rate. For example economic reasons like inflation, interest rates of central banks, political stability and the economic overall situation. The overall performance of your investment will also depend on the timing of your investments. If you bought the loans when the foreign currency was cheap and sold it after it gained additional value, your investment will have performed even better.   

Overview of exchange rate development for foreign currencies on the Mintos platform
The overview shows how the exchange rate would have influenced your total peer to peer investment if you started your investment “x” time ago (does not factor in exchange fees) If you for example invested in the Ruble 5 years ago when it was on the highest. The value of your portfolio would be -54,7% less when exchanging back to Euro since every ruble would cost more Euros .

Calculations on how the exchange rate would have influenced your investment over time

To illustrate how your peer to peer crowdlending investment will be influenced by the exchange rate fee, the exchange rate, and the timing of your investment a number of examples will be presented below for the most popular foreign currencies on Mintos. Namely for Russian rubles, Georgian lari, Kazakhstani tenge, Polish zloty and Mexican peso. The calculations will show the extended internal rate of return (XIRR) over time, adjusted for the development of the foreign currency’s exchange rate and the Mintos exchange fee. The assumptions of the calculation is that the there is no cash drag on loans, the interest rate for the bought loans remains stable and that the exchange rate fee is not changing. The calculation will include the fee for exchanging the currency as well as for changing it back. That is why the graph often will be lower for short time investments to illustrate that is not a good investment to change to foreign currency and back again with a very short investment time frame. Each graph will show the highest and lowest interest rate currently offered at the marketplace. The exchange rates used are from the exact day between months and 5 years ago. (You can click on the pictures if they are too small on mobile devices)

Your average yearly income for your Euros invested in Russian rubles on Mintos in 14% and 19.5% foreign currency loans adjusted for exchange rates and exchange fees depending on how long ago you made the initial investment.
Your average yearly income for your Euros invested in Russian rubles on Mintos in 14% and 19.5% foreign currency loans adjusted for exchange rates and exchange fees depending on how long ago you made the initial investment.
 Your average yearly income for your Euros invested in Georgien lari on Mintos in 13,5% and 16% loans adjusted for exchange rates and exchange fees depending on how long ago you made the initial investment.
Your average yearly income for your Euros invested in Georgien lari on Mintos in 13,5% and 16% foreign currency loans adjusted for exchange rates and exchange fees depending on how long ago you made the initial investment.
Your average yearly income for your Euros invested in Kazakhstani tenge on Mintos in 17% and 18% loans adjusted for exchange rates and exchange fees depending on how long ago you made the initial investment.
Your average yearly income for your Euros invested in Kazakhstani tenge on Mintos in 17% and 18% foreign currency loans adjusted for exchange rates and exchange fees depending on how long ago you made the initial investment.
Your average yearly income for your Euros invested in Polish zloty on Mintos in 10,5% and 14% foreign currency loans adjusted for exchange rates and exchange fees depending on how long ago you made the initial investment.
Your average yearly income for your Euros invested in Polish zloty on Mintos in 10,5% and 14% foreign currency loans adjusted for exchange rates and exchange fees depending on how long ago you made the initial investment.
Your average yearly income for your Euros invested in Mexican peso on Mintos in 16% and 18% loans adjusted for exchange rates and exchange fees depending on how long ago you made the initial investment.
Your average yearly income for your Euros invested in Mexican peso on Mintos in 16% and 18% foreign currency loans adjusted for exchange rates and exchange fees depending on how long ago you made the initial investment.

How to invest in foreign currencies on Mintos

So how do you actually invest in foreign currencies on Mintos? The first step is to create your Mintos user and add money into your account. When you have added money you press “Deposit / Withdraw / FX” in the menu and after you choose “currency exchange” and exchange money to foreign currency which will be exchanged at market rates. Only a smaller exchange rate fee has to be paid to Mintos.
A new tab for that currency will be created, and you will now have separate information for the new currency regarding your account statement, loan overview and auto invest. You will now also be able to invest in foreign currency loans in Russian Rubles, Kazakhstani Tenge etc. on the primary and secondary market on Mintos.

Mintos exchange of Euro to Rubles
Screendump from the Mintos platform of the currency exchange.

Conclusion

The foreign currency loans often offers much higher interest rates compared to other loans and gives you the possibility to differentiate your investments between different currencies like Russian Rubles, Polish Zloty, Kazakhstani Tenge and different loan originators and countries. Even so the long term investment on average will give you a much higher interest rate, then the return is seldom as high as the interest rate due the exchange rate fees and the development in exchange rates as illustrated earlier in this blog post. If you invest in foreign currency on Mintos its always a good idea not to invest short term so you can compensate for the lost exchange rate fees that can be as high as 2,5% each time you exchange your money.

Sign up for Mintos if you are not already an investor to start investing in Euro or other foreign currencies.

Want to compare Mintos to other crowdlending platforms? Then check the comparison table here.



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