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Starting a title loan company

3,520 Views | 53 Replies | Last: 6 yr ago by LOYAL AG
Blahhead
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A buddy and I are in the process of researching this venture. We will be sitting down with a lawyer pretty soon to address our questions, options and see about getting contracts done.

Are you or anyone you know in this business? Is it legal to own both the CAB and the lending company? If not, can one of us form the CAB and the other form the lending company? Will it be easy to offer more favorable terms than current lenders are offering? Will $100K get us through the first month of loans, until we start recouping some of our investment? Any regulations changes coming down the pipeline? Anything else to add?

Thanks!
SnowboardAg
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AG
Have you or your buddy looked into a franchise or considered working at one of the different franchises to understand the business more? I don't know much about them, but may help to consider that route to get further knowledge.
Ogre09
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AG
Those places and the people who operate them are pure garbage.
aggietony2010
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AG
Ogre09 said:

Those places and the people who operate them provide a sorely needed source of emergency liquidity to the impoverished and unbanked


FIFY
Long Live Sully
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AG
I would open a brothel first. Better clientele and lower default rate.


Seriously, you will deal daily with people who can't get out of their own way. I can't imagine subjecting myself to that.
Cancelled
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AG
1. Seems like easy money.

2. At first glance I thought you were thinking about opening a title company.
JDCAG (NOT Colin)
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AG
aggietony2010 said:

Ogre09 said:

Those places and the people who operate them provide a sorely needed source of emergency liquidity to the impoverished and unbanked


FIFY


Lol
Ulrich
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JDCAG (NOT Colin) said:

aggietony2010 said:

Ogre09 said:

Those places and the people who operate them provide a sorely needed source of emergency liquidity to the impoverished and unbanked


FIFY


Lol

Some academics did a study on this and basically found that they are going to get these kinds of loans one way or another. When municipalities outlaw title loans, loan sharks take over. It actually gets more expensive because the activity is illegal (depending on what value you place on fingers, of course).
JDCAG (NOT Colin)
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AG
How often are these paid off and the people move on happy for the opportunity? My guess is more often than not these folks end up going elsewhere anyhow, it's just one more person that got their hand in the pot before it happened.

I suppose we should go pat pay day loan centers on the back for their great roles in their communities as well.
aggiepaintrain
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AG
$100k is not enough.

I'd rather open a pawn shop though.

people who take out these loans dig themselves deeper in the hole.
FJB
dallasiteinsa02
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queso1 said:

1. Seems like easy money.

2. At first glance I thought you were thinking about opening a title company.


Same here which it took until post 4 before I figured it out.
Bassmaster
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AG
I suspect that if you went and worked at one of these places for a day, you would quickly realize that it is not a business that you want to be in (assuming you are an alright guy).
Blahhead
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Outside of laying out the business plan, partially funding it, forming the company, hiring the people, etc. I wouldn't be in this business on a day-to-day basis. I am in real estate and also have another business I operate as well.

This just seems like easy money, with virtually no risk. If we can structure our lending terms to be more client friendly, I think it would do well. If we have to repo a few vehicles, I've always wanted to get back into the car business. I would love a little tote the note car lot and this could help build an inventory for that. I am not wanting to repo a persons ride, but I know it will be a byproduct of this business.
aggiepaintrain
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AG
The cars you would repo would be worth NOTHING.
But good luck to you.
FJB
Blahhead
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aggiepaintrain said:

The cars you would repo would be worth NOTHING.
But good luck to you.


If they were worth nothing, you wouldn't lend money out on them. I didn't say I wanted to open a Carmax -- I want a cash lot or a lot where we float the loans on cheap vehicles.
bearmw
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The OP was asking about structuring a business venture that is utilized by literally millions of people on a daily basis. Their credit scores are crap because they can't manage basic financial discipline. They would go to the russian mob if these high risk / high yield notes were not an option.

...yeah yeah...i know...you had a dumba$$ cousin that got screwed by one of these people...ya yah yah...

Either give the guy what he's asking for (fundamentals of business structure) or take your wet panties to politics board.
diehard03
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Quote:

Either give the guy what he's asking for (fundamentals of business structure) or take your wet panties to politics board.

Considering that you gave your opinion on the ethics of the venture in your first paragaph, I would suggest you check your own panties for dampness as well.
TwoMarksHand
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AG
diehard03 said:

Quote:

Either give the guy what he's asking for (fundamentals of business structure) or take your wet panties to politics board.

Considering that you gave your opinion on the ethics of the venture in your first paragaph, I would suggest you check your own panties for dampness as well.
Some moist panties in this board this morning.
diehard03
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Quote:

Some moist panties in this board this morning.

As mentioned, the moral implications of the business model are not the scope of the thread...but it's silly to condemn the opinions of someone while giving your own in the same breath.
JDCAG (NOT Colin)
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AG
bearmw said:

The OP was asking about structuring a business venture that is utilized by literally millions of people on a daily basis. Their credit scores are crap because they can't manage basic financial discipline. They would go to the russian mob if these high risk / high yield notes were not an option.

...yeah yeah...i know...you had a dumba$$ cousin that got screwed by one of these people...ya yah yah...

Either give the guy what he's asking for (fundamentals of business structure) or take your wet panties to politics board.


If these posts bother him, he should definitely not get involved in any sort of low creditworthiness lending business.

Also, let's call a spade a spade - nobody runs these businesses to help out their local community and provide a safe haven. They're just trying to get their cash out before the person goes completely belly up. The whole "they'd go to the russian mob" angle is hilarious, but if it makes you guys feel better, have at it.
94chem
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Quote:

The whole "they'd go to the russian mob" angle is hilarious, but if it makes you guys feel better, have at it.
At least he's not doing heroin (mom of pot-head).
At least he's not robbing banks (dad of bully).
At least she didn't have to go into a back alley (any democrat).
Martin Q. Blank
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aggietony2010 said:

Ogre09 said:

Those places and the people who operate them provide a sorely needed source of emergency liquidity to the impoverished and unbanked
FIFY
Emergency loans should be given to the poor interest free. High interest loans for someone's rims and 50" TV should not be given at all.
ATM9000
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AG
Martin Q. Blank said:

aggietony2010 said:

Ogre09 said:

Those places and the people who operate them provide a sorely needed source of emergency liquidity to the impoverished and unbanked
FIFY
Emergency loans should be given to the poor interest free. High interest loans for someone's rims and 50" TV should not be given at all.

Cool... so conceptualize this principal you laid out for a business. How do you make it work?
diehard03
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His plan isn't a business.
bearmw
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No opinion; Francis, just fact.

Just because these facts don't align with your "Barack Obama School of Business" principles doesn't make them any less true.

Since you brought up opinion I will indulge and ask for yours.... is this business any more unethical then mega-mortgage/banks robo-signing loan docs based on "stated income" then foreclosing on these people and taking a public bailout?







diehard03
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Quote:

No opinion; Francis, just fact.

Just because these facts don't align with your "Barack Obama School of Business" principles doesn't make them any less true.

Since you brought up opinion I will indulge and ask for yours.... is this business any more unethical then mega-mortgage/banks robo-signing loan docs based on "stated income" then foreclosing on these people and taking a public bailout?

It's obvious who has the wet drawers here.

I wasnt aware that ethics was a sliding scale based on what else was ethical. This is a weak argument. I'm surprised that someone against Barack's business school would be in favor of moral relativism.

Now, as far as ethics of this business....the business is essentially selling a financial product to someone whos desperate, poor, probably uneducated/undisciplined and basically taking their car from them if they continue to be...poor, uneducated, and undisciplined. Moreover, the value of a car is much higher the further down the social pyramid because it's often the only way someone makes any money. They are working at a job that requires you to be somewhere or you don't get paid.

I'm a free market guy, so I think the question is less "Can you" and more "should you".
Kurt Gowdy
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AG
Quote:

This just seems like easy money, with virtually no risk.
Virtually no risk would be cashing checks for workers at the local factory/large facility/employer and skimming a fee.

Your risk will be determined upon the advance rate you give per vehicle. If you're lending anything over 35-40% of the "perceived" value - I would venture to say that you've got a pretty risky venture.
Blahhead
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Kurt Gowdy said:

Quote:

This just seems like easy money, with virtually no risk.
Virtually no risk would be cashing checks for workers at the local factory/large facility/employer and skimming a fee.

Your risk will be determined upon the advance rate you give per vehicle. If you're lending anything over 35-40% of the "perceived" value - I would venture to say that you've got a pretty risky venture.


You're lending around 30% of trade-in value. Not all places do it, but we would probably require a key or charge extra fees without the key. That way if we had to pay for a true repo, that would be built in.
Kurt Gowdy
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AG
Quote:

Will it be easy to offer more favorable terms than current lenders are offering?
With the clientele with whom you'll be dealing, "more favorable" terms is whether or not they can get what they want. More often than not, payment nor interest rate impacts their decision because most of them do not plan on paying you back. If they had a history of repaying their debts, they wouldn't be willing to borrow money at 25%. That's why mitigating your risk from an LTV standpoint is so crucial in a deal of this sort. I'd venture to say that the primary payback of these loans (over 6 months) would be via liquidation of collateral.

For the record, I'm for loan stores and checking cashing stores etc. Chasing these bunk ass cars around whichever city you're in is going to get old.
Kurt Gowdy
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AG
In that case, build a GPS fee into your fees, inspect the car prior to funding, and do periodic collateral checks and you may have found a winner.
Blahhead
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Maybe one or two a year have a blown engine or make it across the border. You just have to make sure people here are established and check references.
Blahhead
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Kurt Gowdy said:

In that case, build a GPS fee into your fees, inspect the car prior to funding, and do periodic collateral checks and you may have found a winner.


I don't think anyone would lend money without a simple inspection. A GPS isn't needed if you do your due diligence.
Kurt Gowdy
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AG
You'll never make a loan if you're checking references and you're crazy to trust any positive reference you'll receive. You're dealing with the sorriest of the sorry.

And none of these people are established. They'll have five address and three phone numbers in the 9 months you'll carry their note.

Blahhead
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Kurt Gowdy said:

Quote:

Will it be easy to offer more favorable terms than current lenders are offering?
With the clientele with whom you'll be dealing, "more favorable" terms is whether or not they can get what they want. More often than not, payment nor interest rate impacts their decision because most of them do not plan on paying you back. If they had a history of repaying their debts, they wouldn't be willing to borrow money at 25%. That's why mitigating your risk from an LTV standpoint is so crucial in a deal of this sort. I'd venture to say that the primary payback of these loans (over 6 months) would be via liquidation of collateral.

For the record, I'm for loan stores and checking cashing stores etc. Chasing these bunk ass cars around whichever city you're in is going to get old.


The average interest payment is $21 per $100 borrowed. If you borrow a K, you owe $210 in interest to satisfy the roll over or $1,210 to payoff the loan after the first month. The state law only allows the loan to be rolled over five times. The loan has to be satisfied in five months or less.
Kurt Gowdy
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AG
Quote:

The loan has to be satisfied in five months or less.
...or what?
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