Monefit SmartSaver risk: How high is the risk for 7.25 % interest?
With SmartSaver, Monefit offers private investors like you an interesting product with which you can earn 7.25 % interest per year. At the same time, investors can withdraw their money daily. You can find out how high the risk of an investment in SmartSaver is in this article.
This is what it’s about:
- How do investors benefit from Monefit SmartSaver?
- What are the 3 biggest risks of investing in Monefit?
- What is the current status of the parent company Creditstar?
- And how will I invest my money on Monefit in the future?
What does Monefit SmartSaver offer?
Monefit SmartSaver presents itself as a major competitor to Bondora’s well-known ‘Go & Grow’ product, which is now used by more than 200,000 investors. However, there have been major changes at Bondora. Instead of the original 6.75 %, new investors now only receive 4 % interest per year – and this in times of rising interest rates.
The Monefit platform, on the other hand, offers its investors 7.25 % interest and now also pays this out daily, which ensures higher compound interest. This means that instead of 7 %, it is actually 7.25 %.
I myself am currently invested in Monefit with around €1,300 and will continue to increase my investment over the next few months and ideally double, maybe even triple it.
However, as every investor should know, return is always associated with risk. And with a return of 7 %, Monefit SmartSaver does involve a certain amount of risk. I asked the company detailed questions about the risks associated with their product so that you too can better assess the risks of investing in Monefit. Let’s take a closer look.
The 3 major risks with Monefit
As every investment harbours risks, let’s take a look at the three biggest risks associated with Monefit. Firstly, let’s take a look at the potential risk of insolvency of the Creditstar Group as the parent company.
For the second risk, we analyse the liquidity of the Creditstar Group on the basis of in-depth questions and publicly available statistics. There is also the risk that the returns on the loans in which investors invest are not as high as advertised at the end of the day. We look at this risk last.
Risk 1: Insolvency of the parent company
A significant risk is the insolvency of the parent company ‘Creditstar’. In such a case, investors with valid payment claims would also lose out, as all payments would be frozen in the event of insolvency. And such insolvency proceedings can take a long time for investors.
However, the risk of the Creditstar Group becoming insolvent is already significantly reduced by the size of the company. The company is not just any small lender, but a group that is based in 8 European countries and is also monitored by the relevant supervisory authority in all of these countries.
The Creditstar Group’s annual financial statements have been audited by KPMG since 2019. These show that the company is extremely profitable and recorded a profit of 5.4 million euros in 2020 and 5.8 million euros in 2021.
I asked Creditstar how the company is actually performing and received the answer that the group has existed since 2006, has been audited since 2007 and has issued 37 bonds since it was founded. According to the company, turnover has grown by 34 % and the loan portfolio by 25 % in the last 12 months.
All of these are definitely strong values, which is why I do not expect the Creditstar Group – the parent company of Monefit – to become insolvent in the foreseeable future.
We have now ticked off the first risk point. Now let’s take a look at risk point 2, liquidity. Because this is directly related to insolvency.
Risk 2: Liquidity
The second risk that should also be considered is the liquidity of the Creditstar Group. As far as its liquidity is concerned, the Creditstar Group was unable to pay its loans on Mintos on time in 2022. This was due to interest rates, which have skyrocketed due to the current state of the global economy.
However, a lot has happened since then. If you take a look at the following chart, you can see that payments totalling EUR 8.3 million from the Creditstar Group to investors on Mintos were outstanding at the turn of the year from 2022 to 2023. These were then repaid on an ongoing basis, but with the 1st of April, the repayments became even higher.
The outstanding payments are now only half, i.e. 4 million euros. When asked by when the Creditstar Group would like to pay out the remaining amount, the answer was clear: by the end of May.
Whether this will be the case remains to be seen. However, the rapid repayments to date have already given me confidence that Creditstar will repay its debts to investors as agreed and that liquidity will be significantly better than last year.
In addition, Mintos has given the Creditstar Group a substantial premium on the outstanding loans due to the late payments. These are now subject to a whopping 18% interest rate per year, which will once again prompt Creditstar to repay the debt as quickly as possible.
Risk 3: Interest rates too low
In addition to the risk of insolvency and low liquidity, there is also the risk of low interest rates on Monefit’s loans. This is also where the parent company Creditstar comes into play. This is because there is a possibility that Creditstar’s yields, which co-finance investors on Mintos, could fall so sharply that Mintos can no longer afford to pay its 7.25 % interest to investors.
In order to better assess this risk, we take a look at the Creditstar Group’s most recent annual financial statements.
The annual financial statements show that Creditstar’s return on equity across the entire Group was 14.2% in 2021 and as much as 17.9% in 2020. The profit margin was 12.1% and 15.3% respectively.
These key figures are important, as it can generally be said that the return on equity should always be at least as high as the interest rate that the borrower has to pay. This is also logical, because after all, the money that is paid out to investors must also be generated.
With interest of 7.25 %, which investors can deduct daily, there is therefore a good buffer when considering the return on equity, which was 14.2 % in 2021.
The same applies to Creditstar’s bonds, through which the Group currently finances itself to a large extent. Here too, the interest rate is below the return on equity of 14.2% (2021).
In the past, interest rates on bonds have also been lower – sometimes even at 8% – but due to the current market situation, interest rates on bonds have now risen.
In my opinion, one can nevertheless say that Creditstar can afford the current interest rates on the market that they offer in their capital mix (bonds, Mintos, Monefit).
As investors on Monefit have the option of withdrawing their money from the platform on a daily basis, it must also be available to many investors on a daily basis. For this reason, I also asked how much of Monefit’s money is held in cash to ensure daily payouts. The answer from Monefit: 15-20 per cent. This means that Monefit holds 5 percentage points more cash than its big competitor Bondora Go & Grow.
The Monefit loan portfolio
We have now clarified the 3 biggest risks associated with an investment in Monefit. However, many investors are also interested in the details of the current loan portfolio on Monefit and how much interest Monefit charges its customers. That’s why I asked again here.
According to Creditstar, it charges 25-35% interest per year on its flexible loans, which allow you to pay money in and out at any time. These have an average term of 8 to 9 months. The average term for credit lines is 2 years and 9 months. Of these loans, 3.9 % per year is paid out, which is a good value in this sector.
Conclusion: good prospects for an investment
Monefit is an interesting platform from the Creditstar Group on which investors receive 7.25 % interest on their loans and can have their money paid out daily. But with every investment comes risk. However, the Creditstar Group has made very positive developments recently, which is why the risk of insolvency has been minimised and liquidity is also improving. For this reason, I am continuing to expand my own investment in Monefit and am now investing a further €500. This brings my total investment to €1,800. The 7.25 % interest should hopefully be guaranteed.
