January 8, 2020

Mogo now extends the offer by adding loans at higher interest rate without buyback guarantee and introducing risk categories

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Mogo Group, one of the largest used-car financing companies in Europe, extends its offering on Mintos once again by adding a new higher-yielding investment product to the platform. Mogo loans without the buyback guarantee are available again on the marketplace. Moreover, you can now tailor your investments according to loan risk categories which are based on loan originators’ unique internal scoring models.

Mogo Group was founded in 2012 in Latvia and joined the Mintos marketplace in 2015, originally offering loans for investment from Latvia. Since then, Mogo Group’s presence on the marketplace has grown substantially and now places loans on the marketplace from Bulgaria, Estonia, Georgia, Latvia, Lithuania, Poland, Romania, Moldova, Armenia, Belarus and Albania. As of September 30, 2019, Mogo Group had a net loan portfolio of over EUR 183 million across its operations.

Mogo loans without buy-back guarantee: An opportunity to earn higher returns than with current Mogo loan offering

Loans without the buyback guarantee is an opportunity for investors to earn potentially higher net returns. Potential interest rate return premiums are at least 1.5% annually in comparison with current offerings with the buyback guarantee. For instance, AA category borrower’s loan listed with the buyback guarantee would earn investor 9% annually; simultaneously investing in the same risk category borrower’s loan listed without the buyback guarantee would generate annual yield of 12% with ~1% possibility of loan default, hence the investors willing to take this risk could substantially increase their annual returns.

Mogo will start with a limited number of loans originated in Georgia to test investors’ risk appetite. Given sufficient demand, the loan supply will be increased over time and other countries will also offer loans without buyback and with even more attractive returns. For all loans placed on Mintos without the buyback guarantee,  Mogo Group will retain 10% on its balance sheet, to ensure its interests are aligned with investors on Mintos. Note that as of now Mogo will be offering loans without the buyback guarantee only of the AAA, AA and A category clients with the estimated annual bad debt rates of below 0.75%, 0.75%-1.25% and 1.25%-2.50% respectively. Estimated annual bad rate is based on a combination of the historical data as well as Mogo’s assessment of the future expected performance of the issued loans derived from their proprietary in-house comprehensive risk model.

This is a unique opportunity to diversify your investment portfolio and earn potentially higher returns compared to the current Mogo loan offerings on Mintos platform.

Here is the list of the risk categories used by Mogo and with the following pricing:

Category (Score)Est. annual bad debt rateInterest rate with BuybackInterest rate without Buyback
AAA<0.75%8.0% – 10.0%10.0% – 12.0%
AA0.75% – 1.25%8.0% – 10.0%11.0% – 13.0%
A1.25% – 2.5%8.0% – 10.0%12.5% – 14.5%
BBB2.5% – 4.5%8.0% – 10.0%n/a*
BB4.5% – 6.5%8.0% – 10.0%n/a*
B6.5% – 9.0%8.0% – 10.0%n/a*
C>9.0%8.0% – 10.0%n/a*

*categories that are not currently offered without the buyback, but will be offered in the future and the interest rates for those will be added on the platform.

However, the estimated annual bad debt rates are not a guarantee of the actual bad debt an investor will experience. Investors should spread their investments across many loans to reduce the impact of any single default.