Should you reward your borrowers for making their payments on time? How could a reward program lower your default rates and build customer rapport? Many of us “beat-up” our borrowers in an effort to get them to pay us first. How many lenders employ a strategy of rewarding good borrowers who pay us on time?
There’s some interesting research available at Filene.org. Its entitled, “Lower Interest for Timeliness (LIFT) Pilot: Final Report”
“As part of the market test, the LIFT feature rewarded consumers who made three consecutive on-time payments with a 25-basis-point loan pricing reduction. Within the report, a team of researchers from the University of Wisconsin-Madison present detailed insights and results from this market pilot.”
“The researchers conclude that the LIFT pilot proves borrowers do respond to positive incentives for on-time payments. The report also highlights the impact LIFT had on late fees, late-payments, and defaults.” Here’s a link to access the report: Filene.org. It’s not inexpensive! However, I’ve already shared the conclusion with you.
While you’re at it, consider starting a title loan business:
Car Title Loan Business 101: A car title loan is a high-interest, one month loan on a vehicle using the owner’s title as collateral. (Note: refer to your state/province for specifics.) Most title loan lenders require the vehicle to be absent any outstanding loans; a “free and clear title.”
Unlike a pawn loan, the beauty of a title loan is that the owner seeking the title loan still has possession of their vehicle. However, if the owner fails to make timely payments, the title lender will repossess the collateral. Best practices dictate that, after all repossession fees, auction costs, re-marketing costs, etc. are deducted from the sales price, any surplus is refunded to the consumer.
Typically, title loan borrowers pay 10% or more per month in interest! As an example, a $2500 car title loan at 10% interest/month would cost the borrower $250 per month. A 3 month loan would total $750 in interest to the lender. And, at the end of this 3 month example, the car title loan borrower would still owe the lender $2500!
It’s common practice for the lender to require, not only the monthly interest payment be paid, but that the principal be reduced by 10% or more each month as well. So, a $2500 loan at 10% per month plus a 10% reduction in the loan principal would require the borrower to pay $500 to the lender at the end of month one.
The pros for a lender are obvious. Let’s assume a California car title loan lender has been in the business 18 months and has $150,000 on the street. Average loan balance is $2501; that’s 60 total loans on the books. Not too hard to accomplish! $150,000 at 10%/month ( a very low interest rate for the industry)= $15,000 gross revenue. Assume the average title loan is 5 months in length. One employee at $8 to $12/hour plus a spiff, a 300 to 600 sq. ft. footprint, loan management software, 2% – 3% default rate, phone, utilities, advertising, annual licensing and audits, blah, blah, blah… and it’s easy to envision an owner netting $10,000/month before taxes with just one location.
One common misconception held by prospective new title lenders is that they need a storage yard, repo men, special insurance… WRONG! There are bonded, licensed repossession companies and auctions that make it easy for the lender to do nothing more than make a phone call or log in to a website to have a borrower’s vehicle picked-up, refurbished, delivered to the auction and a check mailed to the lender all sight unseen!
The cons for the borrower? Loss of their vehicle that probably has a low book value 2X the amount loaned on their collateral.
Want to know more details about car title lending? We’re car title lenders and consultants. Start here: “How to Start a Car Title Loan Business Course.”
How to save $120,000+ selecting a location or, where to locate my Small Dollar Credit (SDC) store.
If you need to select a location for your store, this is for you. I’m going to discuss one of the tools my Team discovered. This isn’t the place to discuss the merits of an Internet lending business versus a store model, mobile websites, licensing, zoning, consumer demographics, parking, signage, competition proximity… [For a thorough discussion of all these topics, read our Manual.] If you’re new to lending – Internet and/or brick-n-mortar – be aware there are many reasons a lender needs a physical location.
In the brick-n-mortar world, your success in the consumer loan industry will depend on your accurate analysis of all the locations available and your ability to make the best choice. I know this is not easy. But, if you approach this challenge in a logical, organized fashion, you will succeed.
A $2000/month location with a 5 year lease will cost you $120,000. Add for signage, building improvements, etc! Obviously, a small investment made to evaluate locations before signing a lease makes sense.
Remember, no one will protect your capital better than you. And, if you’ve seriously studied our Trihouse Training Manuals, few people will understand the payday, car title, and installment loan customer better than you.
Finally, know that I don’t have a dog in this hunt. I’m not being paid by Mark Cuban, an investor in MotionLoft, or anyone to share this tool. So, with these caveats, DRUM ROLL PLEASE!!! Let’s discuss Motionloft as a very cool tool for store location analysis.
What is it? Pedestrian and vehicle counts for your existing and target store locations. Motionloft employs a sensor to count people and vehicles. You get pedestrian and vehicle counts at your locations delivered to you when, where and how you want them. Motionloft reports the data as it happens. Know your traffic, every hour of every day.
Unlike Census data (old data) and hand counts (only capture a few hours of traffic counts and are prone to human error), Motionloft sensors gather information continuously. Sensors do not rely on other technology or personally provided information; instead, they simply count every person and car that passes by. Motionloft’s sensor network provides you with precise pedestrian and vehicle information for specific locations – from the city, to the neighborhood, and down to the exact block. You can compare multiple brick-n-mortar locations to one another easily.
How it Works
- MotionLoft techs install a small sensor at your location
- The sensor begins counting people and vehicles that pass by your location
- You have 24/7 access to your data and reports
- You’ve been in business for years. You have multiple locations. One or two are serious performers. Maybe you have an ugly duckling in the bunch. Install a MotionLoft sensor at your winner. Monitor vehicles and pedestrian counts. Establish a baseline of data to use for challenger campaigns for future store location targets or for those you’re contemplating closing.
- You’re considering two locations for offering consumer loans. Run a MotionLoft challenger scenario to determine which of the two have the highest pedestrian and vehicle traffic counts including days and hours.
- Data collected in real time
- Easy to use through your MotionLoft website dashboard
- Available on your computer, tablet, and phone
- Ability to export as a CSV file for reporting
- Summarized business analytics for decision making
- Friendly presentation of data for sharing with Team members
- Motion Loft enables you to place a sensor at a location to digitally measure pedestrian and vehicle traffic.
- 14-30-annual Days of data collection
- Site Selection Analytics Report
- Business Hours Report
- 24/7 real-time data for your sites
- Free sensor installation and maintenance
How Much $
As of this writing, annual subscriptions run $280/month. Shorter subscriptions are higher. Beats spending $120K or more on the wrong location!
Talk to Justin at MotionLoft.
8 payday stores for sale in South Carolina. $700,000+ in receivables. 4 of the 8 locations have been open for more than 5 years.
All stores are in high visibility areas of traffic with one location in a WalMart shopping center. Leases are transferable. All locations are within 45 minutes to an hour travel from each other.
Stores make a profit month over month. Financials available with a signed NDA.
Along with Deferred Presentment 2 of the locations offer check cashing, Money Gram and a fax service.
Long term employees in place that will stay on during and after the transition.
Contact Info: Kevin Allred – (843) 312-5824 or email@example.com
If you have a serious interest in the tribe sovereign nation lending model, READ THESE. There are two. Dig deep and you’ll be rewarded!
“With over one quarter of American Indians living in poverty, nearly twice the national average, it has never been more important to promote confidence in the American Indian economy — this confidence is threatened when courts do not give full force and effect to contracting parties’ desire to resolve their private disputes using tribal courts and tribal law.”
ISSUES PRESENTED FOR REVIEW
The Decision will have disastrous consequences for Indian Country businesses and their ability to engage in off-reservation electronic commerce, whether the business is tribally owned or owned by an individual tribal member, in contravention of well-established Congressional policy and Supreme Court jurisprudence supporting tribal economic development.
SUMMARY OF ARGUMENT
“Amici argue that the Panel’s decision, particularly the Panel’s new requirement that a non-Indian must enter the reservation in order for a tribal court to have jurisdiction or for tribal law to apply, will decimate opportunities for tribal electronic commerce.
Amici also argue that the Decision will contravene well established Congressional policy and Supreme Court jurisprudence supporting tribal economic development, as well as international law requirements prohibiting discrimination against indigenous peoples.
The ability of tribes and tribal members to engage in electronic commerce on equal footing with their off-reservation counterparts is critical to tribal economic development in the modern era.
Amici are gravely concerned that the Decision fundamentally mischaracterizes the scope of tribal court jurisdiction over non-member activity and therefore requests either (1) that this Panel withdraw its decision and affirm the judgment of the district court, or (2) that the Court review this matter en banc. American Indian economic development – whether driven by tribally owned…Read the remaining Argument at the Original Source: