Making sure investment opportunities on Mintos are balanced in terms of risk and return is a top priority for us. So to further enhance this balance for investors, we’ve introduced a new feature for Mintos strategies.
- To enhance the risk and return balance for investors, we’ve introduced dynamic interest rate floors to Mintos strategies
- A rate floor is a minimum interest rate that must be met for a loan to be eligible for a Mintos strategy
- We set a different rate floor for each lending company using a price discovery mechanism
- Rate floors are constantly updated to reflect market conditions, and in case of unexpected market events, we may update them immediately
The introduction of interest rate floors
We’re ensuring investors earn adequate returns with Mintos strategies by implementing a minimum interest rate, also known as a rate floor.
By introducing dynamic rate floors to these strategies, investors will have a wide range of investments at interest rates safeguarded by a price-discovery mechanism.
How does the price-discovery mechanism work?
A lending company may offer loans to investors with various interest rates. So to calculate the interest rate floor, we consider the investing activity (of manual and custom automated strategies) across the interest rate range that a lending company is currently offering on Mintos. If investment volumes are low at a particular interest rate, we set the rate floor above this rate.
For example, if a lending company is offering loans with interest rates between 4% – 14%, but we see that investing activity in loans with interest rates below 10% is low, we set the rate floor for loans from that lending company to above 10%. Once set, Mintos strategies will only invest in loans from that particular company that are of 10% interest or higher.
To set the rate floor for a lending company new to Mintos, we consider the rate floors of other lending companies that are from the same country and offer the same product type.
Rate floors are constantly updated to reflect market conditions, and in case of unexpected market events, we may update them immediately.
To learn more about Mintos strategies, check out investing with Mintos.
Please note that rate floors only apply to Mintos strategies and do not apply to custom strategies or manual investments.