People love to ask me, ‘If you’ve got the whole subprime lending game wired, why are you out here posting, teaching, consulting?’
Let me break it down: I’ve built loan shops that crank six figures a month.
I’ve scaled online portfolios that spit cash while I’m in Europe for the summer.
I’ve got skin in the game, checks in the mail, and keys to a home that overlooks the water in Newport Beach.
But sharing what I know?
That’s been my power play.
It gets me behind closed doors with billion-dollar lenders, tribal operators, startup killers, and the regulators writing tomorrow’s rules.
It sharpens me.
Expands my network.
Keeps me dangerous.
I don’t do strategy calls, consulting gigs, or sell Courses because I need to, I do it because it’s what keeps me at the top of this game. It opens doors money can’t buy.
Let’s cut to the chase. The demand for subprime credit is massive. But so is the risk.
Every day, lenders are either stacking chips or watching their portfolios go up in flames. There’s no middle ground.
Here are tested, battle-hardened tactics to scale your portfolio without watching it implode. I’ve used them. My clients use them. They work.
1. Use Tiered Underwriting Models
Not all subprime borrowers are created equal. Segment borrowers into risk tiers using bureau data. Then match their terms to their risk profile:
Higher risk: Shorter term, smaller principal, higher rate.
Lower risk: Longer term, larger loan, better pricing.
Keep it simple. Keep it tight.
2. Require Instant Bank Verification (IBV)
Forget about stated income. It’s dead.
IBV shows the borrower’s real financial story in real-time:
Payroll deposits
Overdraft patterns
Monthly inflows/outflows
- NSFs
- Your competitors they have loans with
Set hard rules:
No recurring income? No loan.
3+ NSFs in 30 days? Decline.
3. Pre-Screen with AI-Driven Scoring Before Underwriting
Speed is king. But underwriting blind is suicide.
Pre-screen with AI scoring and soft pulls. Filter the junk. You’ll slash cost per funded loan and free your team to focus on real borrowers.
4. Build Hard Stops Into Underwriting
Some applications deserve an instant, unapologetic “Nope.”
Set your non-negotiables:
Open bankruptcies
No verified income
Excessive NSFs
Payday loan stacking
These are deal-killers. Zero exceptions.
5. Add Friction for Borderline Borrowers
If you’re gonna roll the dice, make ’em work for it.
Require extra docs:
Utility bill
ID scan
Recent pay stub
Utilize OCR and automation to ensure a smooth process for your operations team. The right friction filters out fraudsters and flakes.
6. Recycle Winners into Renewals & Lines of Credit
Got a borrower who’s repaid 2–3 loans? That’s a keeper.
Roll them into:
Bigger loans
Lower rates
Longer terms
Installments or LOCs
Boosts retention. Increases LTV. Slashes acquisition costs.
7. Watch Your KPIs Like a Hawk
Here’s where most lenders screw up.
You grow, but you stop watching the numbers. That’s when the default virus spreads.
Monitor these KPIs DAILY:
1. Charge-Off Rate by Vintage
What it is: Percentage of loans from a specific period that end up charged off. Why it matters: Reveals underwriting mistakes in real-time. How to calculate: Total charged-off loans from a vintage ÷ total originated in that vintage. Example: 10% charge-off in April’s loans? You’ve got a problem.
2. % of Portfolio 1–30 DPD (Days Past Due)
What it is: Percentage of loans currently late but under 30 days. Why it matters: Early signal of delinquency trends. How to calculate: Number of loans 1–30 days late ÷ total active loans. Example: If 15% of your book is trending late, collection action needs heat.
3. Early Payment Default (EPD) Rate
What it is: Loans that default within the first 30–60 days. Why it matters: Indicates fraud or aggressive underwriting. How to calculate: Number of EPDs ÷ total loans originated in a period. Example: 8% EPD rate? That’s a dumpster fire.
4. Default Rate by Lead Source
What it is: Measures default performance from each acquisition channel. Why it matters: Separates the gold from the garbage in your marketing. How to calculate: Defaults from each source ÷ total funded from that source. Example: Facebook leads default at 12%, SEO at 5%? You know what to scale.
5 More Killer KPIs Every Subprime Lender Should Track
5. Cost Per Funded Loan (CPFL)
What it is: Total marketing + ops cost to fund a single loan. Why it matters: You’re not in the loan business. You’re in the profit business. How to calculate: Total cost to acquire and underwrite ÷ number of loans funded. Example: $250 CPFL on a $300 loan? You’re drowning.
6. Average Loan Duration (by product type)
What it is: How long your loans last. Why it matters: Helps manage cash flow and pricing models. How to calculate: Sum of days all loans are outstanding ÷ number of loans. Example: If payday loans are dragging out past 30 days, your churn is broken.
7. Repeat Borrower Rate
What it is: Percentage of borrowers who return for another loan. Why it matters: High LTV. Lower acquisition costs. Loyalty pays. How to calculate: Repeat borrowers ÷ total borrowers. Example: 40%+ repeat rate? You’re building a money machine.
8. Collection Recovery Rate
What it is: How much you recover post-default. Why it matters: You’re leaving cash on the table if you’re weak here. How to calculate: Dollars recovered ÷ total charged-off amount. Example: 20% recovery? Not great. 40%? Now we’re talking.
9. Net Portfolio Yield
What it is: Actual profit on your loan book after losses and expenses. Why it matters: Tells the real story of your business. How to calculate: (Total interest + fees earned – charge-offs – expenses) ÷ average loan book size. Example: 25%+ yield? You’re cooking. 5%? Fix it or fold it.
The Final Word
These KPIs? They’re not buzzwords. They’re your lifeline.
They show you what’s working, what’s bleeding, and what’s going to bury you if you don’t act. But these 9? They’re just the tip of the iceberg.
I’ve got 100+ more KPIs that every serious lender must monitor. I put them all in my course: “How to Loan Money to Strangers Without Getting Your Butt Handed to You.”
If you’re done playing small ball… If you want to scale like a shark… If you want the unfair advantage my clients pay top dollar for…
Click the Blue Button to Learn More.
Because this isn’t theory. This is the business of lending money to the masses. And you, my friend, are about to become their banker.
Let’s go make a fortune.