Category: Profits

19
Apr

Title Loan Companies are Profitable?

Posted by / Profits

So… you’ve been “googling” for weeks trying to figure out if a car title loan business you’ve been thinking about starting is gonna make money.

Title Loan Companies Profitable?

You see the title loan stores all around you. Maybe you’ve even noticed a few new title loan companies opening up in your city.

Do Title Loan Stores Make Money?

Let’s take a look at some real world numbers:

A title loan customer walked into our California store after “finding” us on her phone. [Yep, it’s important your website look great on a cellphone!]

She had a job and a 2009 Toyota 4Runner with 84,000 miles loaded with equipment. This truck was in fair shape. Low book value was close to $15K. She needed $3000 for 30 days. She had a clear title…

How could we go wrong in this scenario? We couldn’t! In Calif., under the Department of Business Oversight CFL licensing rules, we can charge whatever interest rate we choose to. Of course, as so often stated in our “Car Title Loan Training Manual,” we know what our competitors are charging because we mystery shop them monthly.

So… $3000 at 9% per month is what we proposed. She accepted. For the math challenged – like me – that works out to $270/month in interest for as long as she chooses to keep our $3000.

That’s $270/month for a car title loan month after month until she pays back our $3000 loan principal. So, she could conceiveably pay us $270/month for 8 months, as just one example, $2160 in fees AND still owe us $3000! Let’s not forget we have the title to a truck worth at least $12K in a fire sale!

Now, every State is different. [We have the car title loan State license applications and fee structures for every State these loans are legal in.]

Car title loan fees in the USA range from 3%/month to 25%+ per month!

It doesn’t take much of an imagination to realize that if in California, for example, we have $100,000 “on the street” in the form of car title loans earning 9% per month in gross fee income that equals $9,000/month. If our title oans average $3000, we only need 33 title loans; that’s ONE PER DAY. You think one employee can handle this volume 🙂 Will your city demographics support this?

Car title loan monthly store expenses:

  • Rent = $750
  • Employee (22 days/month at $20/hr all in = $3520 [High]
  • Insurance, advertising, phones, software, licenses, accting, etc. = $500
  • Misc. B.S. = $200/month
  • NET before taxes = $4000/month ABSENTEE OPERATED = $48K/year
California Title Loan Business Startup

Start a Title Loan Biz

Now, this takes care of all your fixed costs. What if, after working your ass-off or an investor came forward, you could put together another $100K to “work on the street.”

$9,000 per month less your variable overhead = roughly $75,600/year + the $48,000/year totals $123,600! Recall that you would certainly not need another employee for this scenario!

So… YES! CAR TITLE LOAN LENDING IS PROFITABLE!

More info? Jer@AutomobilePawn.com 702-208-6736

 

29
Mar

Are Title Loan Franchises Profitable?

Posted by / Profits

Title Loan Franchises Profitable!

Are car title loan businesses profitable? Is buying a title loan company franchise necessary?

Here’s your next installment of our Car Title Loan Business mini-course.

Car Title Loan non-franchise company profits: (See our actual financial metrics below.)

$50,000 in car title loans “on the street.”

Each “Title Loan” principal avg. = $1185.

Total car title loans outstanding = 42

Fees = $25/$100 loan principal. $12,500/month gross fee income.

So… the question you have to ask is “Can I achieve $100,000 “on the street” eventually? In my town? At this rate?

That’s $25,000 per month in gross income plus late fees, revenue generated from other services you offer such as tax returns, bill pay, money transfer, money orders…

Car title loan franchise profitable

Title Loan Business

Following our guidelines on our AutomobilePawn.com website at http://www.AutomobilePawn.com you can hit these numbers with 1.5 employees and run this location from anywhere via the Internet.

Overview of the Car Title Loan Industry

Known as title loans, pink slip loans, title pawn loans, car-title-loans, auto-title, automobile title loans, title loan business, motor vehicle equity lines of credit… Basically the borrower offers the title of their vehicle as collateral for a loan. The traditional car title loan is similar to a payday loan in that they are typically single-payment loans with one month terms. At the end of each term, the car title loan is renewed by paying the fees due. In many cases, the borrower will “pay-down” a portion of the principal due as well.

A title loan is a way for a consumer or small business owner to borrow against the equity in their motor vehicle.

Most title loan customers do not own real estate so their vehicle is their most valuable asset.

Typically these are small loans. The USA average is less than $1000.

Like payday loans, car title loans are marketed as small, quick and easy emergency loans.  The major differences are the car title loan is collateralized (Collateral: assets pledged by a borrower to secure a loan or other credit, and subject to seizure in the event of default) by a vehicle (car, boat, RV, motorcycle…) and, in many states, the maximum loan amount is set higher by statute.

Loan terms vary depending on state or provincial statute as well.  30 days is typical but terms do vary by geographic area.  Refer to the State Laws Sections at the end of this Manual for specific data.

The finance charge is simple interest.

Rarely are there fees, points, penalties, hidden charges, etc.  Rates are commonly in the range of 25% interest on the principal for a 30 day period.

Credit reports are not used to determine whether an auto title loan customer will qualify.  Generally the critical factors are:

  •  Value of the collateral. It must be 100% unencumbered. Or, you can use a portion of the loan principal to pay off any liens in order to “clear” the title. This is a hassle but many car title lenders will “jump through the hoops” when the collateral is highly      valued. Examples? Trucks, RV’s, boats, high-dollar sports cars…
  •  Ability of the auto title loan customer to make the payments.  Contrary to what the consumer protectionists’ claim, we do want our customer to successfully pay us back!

There are two auto title loan models we use:

  • Auto title loan: we take possession of the unencumbered title or “pink slip” to the vehicle.  The consumer continues to maintain possession and drive the car.
  • Auto pawn: we take possession of the vehicle and store it.

This Manual is appropriate for both approaches. The major differences are fees imposed on the borrower and the specific license issued by your state or province to carry out each activity.

Car Title Loan Metrics (Avg. for Trihouse Consulting & Clients)

Median Loan Principal: $1185

Median Car Value (Low Kelly Blue Book): $3285

Median Loan to Value Ratio: 32%

Median APR: 300%

Avg. Number Repos/100: 4.5

Avg. Number Rollovers: 8

Typical Costs for U.S. Borrower

  • Average “low book” value: $2800
  • Average loan principal: $1185
  • Principal and fees due in 30 days: $1481.25 ($296.25 fee + $1185 principal)
  • Average  loan fee: 25% per month
  • Average  total: fees paid (8 rollovers) $2370
  • Total paid in principal & fees (8 rollovers: $3555

NOTE: often additional DMV & Reg. fees. Depends on State/Province.

So… should you buy a car title loan franchise? We say no. Take the $25K to $45K franchise fee and loan it out instead in the form of car title loans. Depending on your State, these funds will put another $2000 to as much as $11,250+ on your top line income statement!

Jer@AutomobilePawn.com

Tactics & Strategies for Title Loan Lenders http://www.AutomobilePawn.com

702-208-6736 [10 AM – 4 PM PDT]

 

22
Dec

Are Car Title Loan Businesses Profitable?

Posted by / Profits

Profits & ROI: Lending $$ on Car Titles

Title loan business profits.

Before you invest any more time in considering a car title loan business start-up, let me explain how much MONEY you can make!

Let’s begin with a real transaction. We have equity in California stores. We offer payday loans, car title lending, scrap gold buying and tax services.

In one of our California title loan locations, a new customer walked-in requesting a title loan on his truck. We determined the “low-book” value of his collateral was $15,000. We loaned $3000 at 9% per month ($270/month) for 36 months with zero pre-payment penalty. If this customer chooses to, he’ll pay us a total of $9720 in fees AND will still owe us $3000 in loan principal.

What’s the worse case? Our borrower doesn’t pay us back the $3000. We call our repo guy and he picks up the truck. He delivers it to the auction. The auction company cleans it up and sells it for us. We get a check from the auction for $12,500. We add on our repo fees, auction fees, late fees… and send our truck owner the balance. All we did is pick up the phone!

The point?
You really don’t need to read any further to grasp the profit potential in the title loan industry.

If you’re interested, I delve DEEPLY into PROFITS in our “Title Loan Manual” here: http://www.AutomobilePawn.com

Title Loan Business

Title Loan Business

Once you get rockin & rollin, it’s not a huge leap to make 100+ title loans via one store or website.
100 title loans averaging $3000/ea = $300,000 “on the street.”
$300,000 X 9%/month = $27,000/month in gross fee income!

As you can see, deduct for 1.5 employees, rent, phones, software… AND YOU”RE MAKING SERIOUS MONEY!

You will read a daily newspaper somewhere and stories like these will appear:

A single mom, Amy Poormom in Iowa, received a $350 auto title loan for 14 days, paid only the interest portion 8 times with no portion applied to the principal, in total paying $977.

An auto mechanic in Tyler, Texas paid $1211 in interest and fees over 11 months; only having reduced the principal balance by $15.

Burdened by medical expenses, Amy Poormom applied for and received a $500 auto title loan secured by her 1995 Ford Taurus.  This was a loan for 30 days and specified a loan fee of $30 per $100 borrowed.  Amy renewed (paid only the interest/fee of $150) for 12 months.  At this point Amy had paid a total of $1800 in interest/fees while still owing a balance of $500.

Of course, the “mean” car title loan company repossessed Amy’s car (which she needed for work) and sold it for $750 at an auction.  Now Amy can no longer get to work.  Amy lost her job.  Worry and stress put her in the hospital.  Now, the hospital is suing her for non-payment; she has no job so she has no insurance.

What is not mentioned or even considered is that Amy Poormom needed the initial title loan because no one in her family was willing to provide her with the $500 she needed for tires and brakes on the car.  The auto title loan company actually enabled her to gain another 12 months to get her life back on track.  It could be said that had the auto title loan company not come to her aid and provided some hope for Amy, the ultimate outcome would have come earlier.  Perhaps the family should have performed an intervention to help her with her crack habit?

Ok, if you’re reading this you may think we are getting carried away. But these are real-life events.

ENOUGH OF THIS!  If you’re so inclined, make some serious cash and use your profits to give back to your community any way you see fit. (Note that Warren Buffet owns MANY mobile home parks. He makes a LOT of money with them. He takes a LOT of heat because of the way they are operated. Warren gives $$$ back…)

Back to title loan business profits.

States and provinces having specific auto title loan statutes and fee structures typically prescribe 3% – 30% per month on the principal loaned; 25% being the average in the USA.  Thus, a $1500 loan for a 30 day time period could yield total interest payments of $45 to $375 with no portion applied to the principal.  Thus, if after 6 months, the consumer continues to “roll-over” this loan they will have paid as much as $2250 in fees/interest.  The balance due would remain $1500!

$500.00 borrowed for a 30 day term will typically cost $125 including miscellaneous fees.  The actual range is roughly $75 to $190 depending on the state/province and the exact circumstances of the borrower.

After you enter the title loan business, you’ll be pleasantly surprised by the number of customers who will have a late model Lexus or Mercedes.  It’s amazing how many people receive settlements and use the proceeds to purchase a new luxury car.  Later they experience cash-flow problems and need your help.  And they have the car titles!

Even in a state like Florida where the title loan statutes prescribe an interest rate of 30% per annum, it’s a simple matter to put $250,000 “on the street” in auto title loans.  This would yield a gross of $75,000/year versus a CD earning $15,000. By the way, Florida title lenders are very creative. They add on road service fees, application fees, up-front loan matching fees… achieving SUBSTANTIAL ROI’s.

Title loan clients may not be totally bereft, but they are in trouble and are willing to borrow money at interest rates dwarfing those of a conventional bank loan; ranging from 17 percent a month (204 percent APR) on $500 or less to 10%, 20%, 30%  percent a month  on more than $5,000.

“Your job is your credit” rings very true in our industry.  We have a Texas title loan operator having 300 people bringing him $40 per week.  That’s $12,000 per week!  If the car breaks down, he has it fixed and adds it to their loan.

A great number of auto title loan lenders add on several fees to improve their ROI’s and provide incentives to their clients to pay on time.  These include but are not limited to:

* A $15 fee if a collection letter must be mailed to the consumer
* A $25 returned check fee Late fees (5% is typical)
* Should a collector be sent to their door, a $50 to $100 fee is imposed
* Deficiency fees are collected should a sale of the vehicle yields less than the amount owed.

Alright. If you found this interesting, PLEASE TELL ME: Jer@AutomobilePawn.com

And, if you’re ready to jump into the Title Loan Industry,
GO HERE and invest in our 300+ page “How to Start a Title Loan Business Manual.”

31
Jul

Car Title Loan Business License & Profits

Posted by / Florida, Profits

Car Title Loan Business, License & Profits.

Consumers today are in need of quick access to cash without having to jump through hoops. Demand for car title loans continues to increase while “big brother” attempts to put a stop to it. To entrepreneurs on the “outside,” it’s becoming more difficult to start a car title loan business much less operate one without running afoul of the law.

This is an error in perception. Car title loan businesses can be highly profitable. Witness TMX Finance as but one example. Even in a state such as Florida, where the car title loan laws can be a challenge, the creative Team at TMX Finance manage to offer car title loan products. From its Georgia headquarters, TMX Finance operates more than 1,470 stores in 18 states with plans to grow by more than 20 percent each year through 2017.

How to start a title loan business

TMX Finance Car Title

Of course, there are those who question the TMX Finance car title loan product. They rant and rave about the 100%+ APR. But their car title loan customers don’t complain. More and more consumers caught in a financial challenge seek out TMX Finance and the rest of us to solve their emergency.

Yes, there are always a few knucklehead consumers who abuse the product. Be it a loan, a drug, alcohol, sex, chocolate, Coca Cola… someone somewhere is going to misuse our services.

And, of course, there are product and service providers who take advantage of consumers as well. Witness the front page of the Wall Street Journal every day. Banks, hedge funds, car makers, drug companies, and yes LENDERS do stupid things.

Malcolm Gladwell refers to them as “Outliers.”

But does this mean all these loan product offerings should be outlawed? Certainly not. New entries into the lending industry are appearing almost daily. Technology combined with “big data” underwriting are enabling entrepreneurs to offer financial products to consumers at rates that make sense given the circumstance. At the other end of the scale, your local title loan lender/payday loan providers – now called installment loan lenders – still remain. Why? Because they’re needed. Because of DEMAND! Because the solo-store lender can still make a good profit AND serve her neighbors in need.

Typically, a car title loan is 30 days in duration. Borrowers give the title to their cars, RV’s, boats, motorcycles… for a loan ranging from $100 to several thousand dollars. On the due date, the borrower can pay the interest/fee and renew the loan for the amount of the principal. If the borrower defaults on the loan, the lender can repossess and eventually auction the car to get their loan principal back.

What the anti-title loan contingent doesn’t realize is that we don’t want the car. We would rather “work” with our customer and get them back on track. If this means waiving a late fee or helping our title loan customer avoid a series of NSF’s we’re more than willing.

Fees paid by title loan borrowers are generally in the 8% to 20% per month range. Borrow $1000 for 30 days and it will cost you $80 to $200 per month. These fees are clearly and plainly discussed with each car title loan borrower. No one puts a gun to the head of a borrower. And, despite the claims of our adversaries, we don’t hide the fees or use a 6pt font to disclose the fees.

In Florida, the max interest rate on a title loan is 30%. TMX changed the format of its loans, charging borrowers the maximum interest rate, and then typically adding fees for two types of insurance.  One of the policies reimburses InstaLoan if the car (collateral) is damaged. Borrowers who can’t repay their loans must pay fees for a new round of insurance each month to keep their cars.

This Florida lending strategy can achieve an effective annual APR rate of 100+ percent. It enables TMX Finance to continue to serve customers in need. The insurance sold through InstaLoan is provided by Lyndon Southern Insurance Co., a subsidiary of the publicly traded Fortegra Financial Corp.

Do your homework to apply for a car title loan business! Florida title lender applicants seek a license from the Florida Office of Financial Regulation. The lender registers under a statute for for consumer finance companies that offer longer-term installment loans. The title lender law bans the inclusion of insurance with loans. The consumer finance law doesn’t. Our “Car Title Bible” covers each state. If they already exist in your State, you know they’re legal.

How to Start Title Loan Biz

How to Start Title Loan Biz

Bottom line? Car title loan products are in demand. Title loan lenders can make a profit and serve their neighbors without abusing them. Lacking your local car title lender, where does a borrower of a few hundred to a few thousand dollars go? Hopefully, their first stop will not be a gun shop! To learn how to start your own car title loan business in any state, check out our “How to Start a Car Title Loan Bible.”

 

 

21
Jul

Title Loan Profits

Posted by / Profits

Car Title Loan Profits

How profitable is a title loan business? What can a car title loan business owner expect to make by lending borrowers money in return for the title to their car?

Triple digit annual percentage rates (APR) are typical for our industry. A recent Missouri State Auditor’s Report revealed the average to be 200% to nearly 400%. Illinois approached 300%. Wisconsin averages 300%.

Here’s a link to The California Department of Business Oversight Report. It reveals 53% of title loans earned 70% – 99% APR’s and business increased 17% year over year!

How to Start Title Loan Biz

Click to Buy

So… how profitable is a title loan business?

What’s this mean to a car title loan company? You loan $1000 and earn $99/month in interest. Your borrower pays you nearly $600 in interest over 6 months. At the end of 6 months, your borrower still owes you the $1000 principal. Not bad!

In many states, Texas for example, typical fees on a $500 loan are 25% per month; $125 month interest only. Note that these are typical rates for auto title loan companies – sometimes referred to as “pink slip loans” having stores in states/provinces with fee caps. When operating in locales not having prescribed statutes you will experience even higher APR’s.

Additionally, it’s not uncommon for auto title loan companies to minimize their APR calculations by failing to compute them properly. This is not necessarily intentional. Many operators simply do not know how to calculate an APR correctly. This is not recommended. It can lead to serious problems, particularly after you become extremely successful. You will become a target  (More on this in our How to Start a Car Title Loan Manual).

How to start a car title loan business

Click to Invest Now!

09
Jul

Car Title Loan Profits

Posted by / Profits

Car Title Loan Profits

Every entrepreneur wants to know how much money they can make in the car title loan industry!

Triple digit annual percentage rates (APR’s) are typical for car title loan stores. A  Missouri State Auditor’s Report revealed the average to be 200% to nearly 400%. Illinois approached 300%. Wisconsin averages 300%. Typical fees on a $500 loan are 25% per month; $125 month interest only. These are typical rates for car title loan companies having stores in states having fee caps. When operating in states not having prescribed statutes, you will experience even higher APR’s.

Car Title Loan ProfitsIt’s not uncommon for car title loan stores to minimize their APR calculations by failing to compute them properly. This is not necessarily intentional. Many operators simply don’t know how to calculate an APR correctly. This is not recommended. It can lead to serious problems, particularly after you become extremely successful. You will become a target. Your solution is to invest in vcar title loan management software. Our “Car Title Loan Bible” has a lengthy chapter devoted to this subject. Learn what to look for when choosing your car title loan software and check out all the vendors offering software.

Jer Ayles

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