How to Invest Wisely in a Car Title Loan Business

A car title loan business involves giving loans to car owners. When you give a loan, you retain the car title and the car so that in case …

A car title loan business involves giving loans to car owners. When you give a loan, you retain the car title and the car so that in case the debtor defaults on paying the loan, you can recover the money by selling the car.

Normally, the amount of loan you give is usually well below the value of the car making the car title loan business a low risk business with potentially big rewards.

Like any business however, there are some factors that you need to have in place in order to succeed in the car title loan business. These include:

1.      Have a sound business plan

A business plan is the foundation of a strong business.

  • It will help you assess the likelihood of success or failure.
  • It will guide on capitalization needs.
  • It’s necessary when pitching to banks, investors and customers.
  • It will help with budgeting for staff and other expenses.

Your rules and terms, such as interest rates for loans, default charges and others, should be clearly outlined in your business plan.

You should compare rates offered by other businesses that deal in title loans, to make sure you are getting the best offer.

Before you draw up your business plan, it is important to conduct a market survey in order to understand the demographics of the proposed business location. This will include factors like age and income levels, which are critical to the success of your loan business.

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2.      Raise enough capital

A car title loan business needs a good capital base. If business is good, you might find yourself drying up your business accounts.

You need to speak to your bank regarding regular funding in order to ensure you always have enough money to loan out and to cover your operating expenses.

It is important to hire an accountant or business controller to help with budgeting, monitoring liquidity and ensuring profitability.

3.      Have a good portfolio of reliable car resellers

You need to ensure that any cars you repossess for unpaid loans can be sold as fast as possible.

For this reason, you should form a relationship with resellers of second hand cars who guarantee to sell the cars in the shortest time possible in order to recoup your working capital.

Having cars sitting out in the car lot for too long leads to further depreciation in value and this makes it harder to get rid of the vehicles. It is an extremely broad market where there is plenty of choices, and the reason why you should spend more time thinking about cheap van leasing or car leasing.

4.      Hire an experienced person to value the car

You need a good appraiser on standby. They will help you determine the amount of loan to give for every car.

  • If you give a very low value, you will get lower interests.
  • If you give too high a value, you will be in trouble if the debtor defaults.

For this reason, an appraiser is a key asset to the growth of your business.

5.      Make sure you are legal

Laws vary from state to state. Laws are also full of grey areas and they can be very easy to misinterpret. Breaking laws that govern businesses that deal with money lending can lead to the closure of your business, heavy fines or even jail time.

Hire a good lawyer to advise you and shield your business against the law.


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