If you’re like the majority of entrepreneurs that arrive here, you’ve spotted all the car title loan stores opening in your town! Fascinated? Intrigued? Wondering how much money these car title loan companies make? Do you need a license? Start-up costs?
Let’s get right to it:
- What’s a car title loan? In return for the title on a car, truck, motorcycle, RV… you loan a borrower 30%, to no more than 60%, of the low book value of the vehicle.
- Profits? Car title loan stores typically charge 8% – 30% per month on the loan principal. That means, $1000 loaned to your customer for the title (pink slip) on say a 2006 Toyota will generate gross revenues (before your expenses) of $80 to $300 per month. So, every 30 days your borrower pays you $80 or more until they eventually pay back the loan principal. The average car title loan is for 7 months. What’s that mean? Your borrower pays you $80 or more per month for 7 months. Then, they pay you the $1000 principal and the car title loan ends.
- Start-up costs? You’ll need a small office; budget $300 and up per month. Signage? $500 and up. Miscellaneous? $1500. The real question is how much $$ you need for “street money.” Let’s say you’re in California. You can legally charge borrowers whatever you like as long as the loan principal is $2501 or more. (NOTE: your state/province will be different. Refer to our Car Title Loan Biz Manual for details.) So… let’s pretend your total fixed and variable monthly business expenses are $6000/month and you’re charging your car title loan customers $20 per month per $100 loaned against their car title. To cover your expenses and “absorb” your overhead costs, you’ll need $30K “on the street. ($6K/month divided by 20% = $30,000.)
- $30K in car title loans assuming an average loan principal of $2500 = 12 car title loans
- As you can imagine, 12 car title loans is not hard to achieve!
- Now, if you worked your ass-off for 6 months and you had $100,000 “on the street” with the average loan principal of $2500 at $20/per hundred per month, you’d gross $20,000 per month in fees! Subtract your overhead of $6K and you net $14,000 per month before taxes. (Note: we are talking averages here! Adjust these numbers up/down whatever you think is appropriate for YOU, your state/province and your appetite for risk.
- $100,000 “on the street” having an average loan principal of $2500 = 40 car title loans outstanding at any one time. Hard to do? Nope! Unless you live on an island.
How to Start or Improve a Consumer Loan Business: Storefront or Internet anywhere!
Is this rocket science? Nope. Just hard work and knowledge required.
Where do you get the start-up money? Beg, borrow, steal, SAVE…
Where do you get the knowledge? From us, silly :o) Here:
Who is this “Car Title Loan Manual” for? Business entrepreneurs, new entrants, experienced players looking for creative ideas, vendors, lawyers and accountants serving our space, academics, investors and hedge fund management – virtually anyone with a need for in-depth knowledge and access to the economic metrics of a car title loan internet or brick-n-mortar enterprise.