Starting a title loan business in California?
You want to start a title loan business? Need the basics? What can you charge title loan borrowers in fees and interest? How do car title loans work?
How to Start Title Loan Biz
(This piece is focused on starting an auto title loan business via the Internet or a store-front in Calififornia. As an entrepreneur contemplating a title loan business startup, know that they are legal in roughly 20 states and we have the license applications, sample contracts and documents, and access to the laws in each state.)
Inspired by a consumer advisory from the California Department of Business Oversite, this Post does a good job of providing California car title loan startup entrepreneurs with the basics about title loan, pink slip loans, auto equity loans…
What’s a car title loan?
Title loans are called many names. Here’s a few auto title loan terms used by consumers to discover a title loan lender:
- Pink slip loans
- Auto title loans
- Automobile title loans
- Car equity loans
- Auto equity loans
- Cash for car title loans
- Title loans
- Auto collateral loans
- Whatever you want to call them…
Basically, car title loan lenders loan money to a borrower in return for the title to the borrower’s car. The borrower is allowed to keep possession of the car and continue to drive it. We charge the borrower whatever we wish for lending the borrower our money. In our California stores, we charge 60% to 120%+ for our loans. (Typically, 8% – 18% per month on the outstanding loan principal.)
If the customer fails to pay us on time AND fails to contact us AND fails to make ANY effort to work with us, we repossess their car. We have it picked up by an independent service. We have the car delivered to the auction. The car is sold at the auction. We deduct our costs, fees and interest from the monies received from the auction company. Any remaining balance is mailed to our borrower.
Title loan Advisory by California Department of Business Oversite
1st, The CDBO advises “caution before borrowing money through an automobile title loan.”
- Title loans require you to offer your car as collateral for your loan.
- If you miss a scheduled payment your title loan lender can reposses your vehicle.
Tips for consumers considering an auto title loan:
- Borrow only as much money as you can afford to fully repay when the payment is due, which may be less than the amount you may be eligible to receive.
- You have the right to full disclosure in your contract of all interest charges, the annual percentage rate (APR) of the loan and all fees. The final contract must be in the language in which you negotiated it.
- Before you take out a loan, read the contract thoroughly and be sure you understand all the terms.
- Once the loan agreement is signed, you are legally responsible to fulfill the obligations in the contract.
- Be aware some lenders use remote engine shutdown devices that allow them to turn off your car if you don’t make payments. Some of these devices have GPS tracking capability.
- Although these loans are quick and easy to obtain, you pay higher prices for the convenience.
- ABOVE ALL, CONSIDER AVAILABLE ALTERNATIVES. Examples include asking your employer for an advance on your next paycheck; finding out if your bank or credit union provides short-term credit products; asking creditors for more time to pay your bills; asking for a loan from a relative or friend.
Auto title loans typically are advertised as short-term loans for people who need money quickly but may not have access to more conventional loans often due to poorcredit scores.
From the California Department of Business Oversight:
“Few assets are more important to Californians’ financial security than their cars. Borrowers who use their auto titles as loan collateral are risking that asset. That’s why we strongly urge
consumers to exercise great care before taking out an auto title loan, and to try other options first. The amount of these loans typically is less than what the car is worth.”
WARNING: FOR ALMOST ALL AUTO TITLE LOANS, THE INTEREST RATE LENDERS CAN CHARGE IS UNLIMITED.
THIS SHOULD BE A LOAN PRODUCT OF LAST RESORT.
“Current California CFL License holders state law does not limit interest rates for consumer loans of $2,500 or more. The annualized interest rate on the vast majority of these loans ranged from 70% to 100% and higher. Even if you don’t have the protection of interest rate limits, the law requires lenders to deal with you fairly and honestly. That means they must fully inform you about the interest you will pay.”
“Carefully review the terms of the loan BEFORE you sign a contract! Always check with the Department of Business Oversight on a company’s license BEFORE entering into an agreement for an auto title loan. www.dbo.ca.gov 1-866-275-2677.”
ATTENTION ENTREPRENEURS: You want to start a car title loan business? Start Here!
HOW TO START A TITLE LOAN BUSINESS