Starting a car title loan business can be a great way to make money and be of service. By ensuring you have everything in place and are prepared for the challenges of owning such a small business, you’ll be able to get off on the right foot and make sure your new venture succeeds!
Research the industry.
You can start learning about the industry by reading books, magazines, and articles on car title loans. Most importantly, GET A CAR TITLE LOAN! Also, talk to people in the industry, especially existing car title lenders. Even if you’re planning an online auto title loan business, if possible, visit stores offering title loans, Take photos of the various state disclosures, licenses, and fee breakdowns typically posted in every car title loan storefront location. You can find this info on websites as well. [And, of course, https://thebusinessoflending.com/297-00/, in our 500+ page PDF Manual.]
To learn more about your competition, you should look at their websites and see how they market themselves. You can also get information from Google Adwords or Bing Ads that will provide you with data about keywords related to your business. You can use this information for keyword research to optimize your website and make sure that it ranks well on search engine result pages (SERPs).
You should also educate yourself about your customers so that you know what their needs are going into the business. This will help ensure you can fulfill these needs when providing services such as funding car title loans and other related products or services like title transfers.
Set your goals.
Before you start your car title loan business, it’s important to set goals. You can’t know whether or not you are achieving your business goals unless you have a clear idea. In the title loan industry, we refer to these as KPIs. [Key Performance Indicators]
There are two things wrong with setting goals before starting a car title loan business:
- Some people think that it is not necessary because the goal will remain the same throughout their career in this field, and this makes them miss out on opportunities that could have benefited them greatly. This is true only if their goal was “be successful,” which leaves room for interpretation by each individual as long as they were able to achieve success as defined by them.
- Other people get so caught up trying to achieve other people’s goals. They forget about their unique talents, strengths, and weaknesses which may make all the difference between success and failure when starting up something new like opening up an auto title loan company!
Know the laws.
There are several different laws that, if not followed, could result in serious penalties. For example, when it comes to how much money you can charge or how quickly your borrower must pay back your loan, each state has its own specific rules. It’s important to know these laws and whether they apply to your business, and how they would affect its operations.
Make sure you fully understand the regulations regarding licensing requirements for title loan businesses in your area and state before starting one yourself. There are rarely zero laws where you operate! That’s true for online and storefront auto title loan businesses. Research what other states have done regarding title loan legislation and mimic something similar for yourself (i.e., don’t just copy from another state’s code). If licensing requirements exist but aren’t enforced, then contact officials so they can start enforcing them! After all, YOU paid for your state license, bond…
For example, Texas requires title loan lenders to act as Credit Access Businesses – CABs. It’s crazy, but lenders cannot loan their own money! They must collaborate with a “3rd Party Lender.” [PS: Our Manual, “How to Loan Money to the Masses,” covers this thoroughly!] Know too that some Texas cities have passed city ordinances. You can’t legally offer car title loans in these cities. Solution? Offer car title loans online or set up your storefront in the county. [Again, our Manual covers how to operate in Texas & every other state in which this loan product is legal. ] Conversely, California passed a <36% APR cap on title loans! Every state is different. [If this were easy, everyone would do it 🙂 ]
Develop a plan.
As you begin your car title loan business, it’s important to develop a comprehensive plan. A well-thought-out plan will help you avoid mistakes and ensure that you are on the right path toward success.
Here are the critical components of your plan:
- Loan product
- Target market
- Strengths/weaknesses compared to the competition
- Financial situation (i.e., how much capital do I have?)
- Risk tolerance (I can tolerate risk if it means I’ll be more successful in five years)
- Exit strategy(s)
- Check out our “Pro Forma Modeling Excel Tool” here: Pro Forma
Choose your location.
The online car title loan model is kicking butt today. Tremendous new tech platforms and GPS devices are revolutionizing our industry. Instant bank verification, same-day funding, AI-powered collection tools, loan management software, and income validation platforms… make lending money online enticing and easier than ever before.
Choosing a physical location for your car title loan business is one of the most important decisions you can make. You want to ensure that your location is accessible to customers and near a busy street or large parking lot. You also want to choose a safe area where there’s not much crime and an area in which many people live, work, and drive around.
The best locations are those with large populations. They have plenty of potential customers who need money fast because they are short on cash after paying their monthly bills, need car repairs, gas to get to work, rent…
Work up a budget.
Before you begin the process of opening your own car title loan business, it’s important to create a budget. This will help you determine how much money you need to invest in your business and how much profit you can expect. To create a good budget for your car title loan business:
- List all expenses that are related to running your car title loan business. Don’t forget to include costs associated with equipment, software, supplies, marketing expenses, employee salaries, and training costs, insurance coverage (if any), state regulations on how much interest rates must be charged on loans—and anything else that may come up during the course of owning a successful auto title lender!
- Calculate how much money each month will be spent going forward based on these estimates for operating expenses. Once this number is determined, it should be compared against projected revenue from loans made over time so that there’s an accurate picture of what may happen during different stages of startup operation as well as future growth plans if needed or desired later down the road when demand begins increasing dramatically due to word-of-mouth advertising strategies being implemented effectively not only locally but regionally and online as well. [Again, our “Pro Forma Modeling Excel Tool” is perfect for this!]
Marketing is a key component of running a successful title loan business, but it’s often overlooked. Instead, businesses believe that once they have the product or service ready, all they need to do is advertise, and customers will come. That might be true for some businesses—but for others, like car title loans where people are putting up their cars as collateral and can’t afford any payment defaults or late payments, there needs to be more than just advertising. You also need to build trust with your clients so that when you tell them about your plan to help them get out from under their financial burden and pay back the loan, they believe in what you’re saying and follow through on it.
There are many ways that marketing can be done—from advertising on radio stations with commercials at the beginning of each hour (or whatever time interval) promoting your business; having billboards placed strategically throughout town; posting flyers at local grocery stores and libraries; sending direct mailings via snail mail and emailing, customer referral rewards… There are countless ways to market depending on what business model fits best into yours (i.e., traditional brick-and-mortar store vs. online eCommerce).
To run a successful car title loan business, you must know all its aspects.
To run a successful car title loan business, you must know all its workings. You need to know the laws and regulations that apply to your business. You should know how to develop a plan for starting up and running your car title loan business. You also need to have knowledge of the latest technology for car title loan lenders and acquire car title loan customers by using social media marketing techniques like GMB [Google My Business], Facebook ads, and Google Adwords. [NOTE: several social media platforms do not allow subprime lending ads for loan products that exceed 36% caps! Workarounds exist, and we discuss them in our 500+ page Manual, “How to Start & Improve a Consumer Loan Business.] You must understand how things work so that you can underwrite car title loans effectively with minimal risk of your time and capital.
PS: We have a LONG LIST of resources focused on “lending to the masses” here: Resources
Don’t be afraid to ask questions, and don’t be shy about taking advice from others. You may have a lot of business knowledge already, but remember that there are always new things to learn—and other people who can teach you. Don’t let your pride stand in the way of this opportunity for growth!
Finally, INVEST IN YOURSELF! And always be learning!
Jer Ayles: TrihouseConsulting@gmail.com The Business of Lending to the Masses