Mintos- Calculate your effective interest rate due to pending payments

Mintos has introduced pending payments which is the time it takes for a Loan Originator(LO) to transfer money to Mintos bank account. When loans are in “pending payment” status, they receive no interest. The maximum “pending payment period” set by Mintos is 10 days. If the LO takes more than 10 days then from day 11 onwards interest will be calculated at 1.2x times the original interest rate until the payment is completed. More can be read here on Mintos blog.

For long term loans, the effect of “pending payment” is negligible. However, this reduces the effective interest rate greatly for short term loans i.e. loans up to 1 month in period. So, is it worth it to buy short term loans? Lets look at an example.

Sunfinance Latvia is offering 25 day loan at 16% interest rate. Lets assume we invest 100 euro in this loan on Jan 1. Once the loan matures on Jan 25, lets assume that the loan goes into pending payment. The LO makes the payment 11 days after maturity i.e. on Feb 5.

Principal = €100
Interest paid at 16% rate = €1.11
Total period of investment = (25 initial loan days + 10 pending payment days) = 35
Effective interest rate = 1.11 * 360 /(100*35) = 11.42%

As you can see above, even though the advertised rate was 16%, the actual interest rate you received was 11.42%. However, this is the worst case scenario. There are some good short term LOs that pay within 1-2 days of loan maturity so keep an eye on Mintos Statistics page to figure out those LOs.

You can use this tool to find the effective interest rate for worst case scenarios.

DisclaimerI am not a real estate expert nor a financial advisor. This is my personal opinion and I can be very well be wrong.

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