Installment Loan Profits
An installment loan business offers tremendous opportunity BUT there are caveats. The first is the implementation of the 36% APR that many consumer advocates propose.
A $500 installment loan for a period of six months at a 36 percent APR produces total revenue of $53.79; just under $9 per month. If just one loan in a portfolio of these installment loans default, the installment loan lender must make ten “good” loans to recover their loan principal on the one bad loan, without considering operating costs on any of the installment loans in their portfolio.
The installment loan lender still requires enough revenue to justify obtaining and maintaining the lending location or internet platform, customer acquisition costs, hiring and paying their installment loan employees, acquiring the supplies and equipment required to run an installment loan business, the costs of maintaining ACH, loan management and Image Cash Letter (ICL) vendor relationships, securing a dependable bank account and all its attendant costs, and complying with the regulations both at the state, FED and or Tribal level.
A DAUNTING TASK, 36%? I Guess the so-called consumer advocates whose agenda is <36% APR’s would like to see installment lenders make it up with volume 🙂