Car Title Loan Business, License & Profits.
Consumers today are in need of quick access to cash without having to jump through hoops. Demand for car title loans continues to increase while “big brother” attempts to put a stop to it. To entrepreneurs on the “outside,” it’s becoming more difficult to start a car title loan business much less operate one without running afoul of the law.
This is an error in perception. Car title loan businesses can be highly profitable. Witness TMX Finance as but one example. Even in a state such as Florida, where the car title loan laws can be a challenge, the creative Team at TMX Finance manage to offer car title loan products. From its Georgia headquarters, TMX Finance operates more than 1,470 stores in 18 states with plans to grow by more than 20 percent each year through 2017.
Of course, there are those who question the TMX Finance car title loan product. They rant and rave about the 100%+ APR. But their car title loan customers don’t complain. More and more consumers caught in a financial challenge seek out TMX Finance and the rest of us to solve their emergency.
Yes, there are always a few knucklehead consumers who abuse the product. Be it a loan, a drug, alcohol, sex, chocolate, Coca Cola… someone somewhere is going to misuse our services.
And, of course, there are product and service providers who take advantage of consumers as well. Witness the front page of the Wall Street Journal every day. Banks, hedge funds, car makers, drug companies, and yes LENDERS do stupid things.
Malcolm Gladwell refers to them as “Outliers.”
But does this mean all these loan product offerings should be outlawed? Certainly not. New entries into the lending industry are appearing almost daily. Technology combined with “big data” underwriting are enabling entrepreneurs to offer financial products to consumers at rates that make sense given the circumstance. At the other end of the scale, your local title loan lender/payday loan providers – now called installment loan lenders – still remain. Why? Because they’re needed. Because of DEMAND! Because the solo-store lender can still make a good profit AND serve her neighbors in need.
Typically, a car title loan is 30 days in duration. Borrowers give the title to their cars, RV’s, boats, motorcycles… for a loan ranging from $100 to several thousand dollars. On the due date, the borrower can pay the interest/fee and renew the loan for the amount of the principal. If the borrower defaults on the loan, the lender can repossess and eventually auction the car to get their loan principal back.
What the anti-title loan contingent doesn’t realize is that we don’t want the car. We would rather “work” with our customer and get them back on track. If this means waiving a late fee or helping our title loan customer avoid a series of NSF’s we’re more than willing.
Fees paid by title loan borrowers are generally in the 8% to 20% per month range. Borrow $1000 for 30 days and it will cost you $80 to $200 per month. These fees are clearly and plainly discussed with each car title loan borrower. No one puts a gun to the head of a borrower. And, despite the claims of our adversaries, we don’t hide the fees or use a 6pt font to disclose the fees.
In Florida, the max interest rate on a title loan is 30%. TMX changed the format of its loans, charging borrowers the maximum interest rate, and then typically adding fees for two types of insurance. One of the policies reimburses InstaLoan if the car (collateral) is damaged. Borrowers who can’t repay their loans must pay fees for a new round of insurance each month to keep their cars.
This Florida lending strategy can achieve an effective annual APR rate of 100+ percent. It enables TMX Finance to continue to serve customers in need. The insurance sold through InstaLoan is provided by Lyndon Southern Insurance Co., a subsidiary of the publicly traded Fortegra Financial Corp.
Do your homework to apply for a car title loan business! Florida title lender applicants seek a license from the Florida Office of Financial Regulation. The lender registers under a statute for for consumer finance companies that offer longer-term installment loans. The title lender law bans the inclusion of insurance with loans. The consumer finance law doesn’t. Our “Car Title Bible” covers each state. If they already exist in your State, you know they’re legal.
Bottom line? Car title loan products are in demand. Title loan lenders can make a profit and serve their neighbors without abusing them. Lacking your local car title lender, where does a borrower of a few hundred to a few thousand dollars go? Hopefully, their first stop will not be a gun shop! To learn how to start your own car title loan business in any state, check out our “How to Start a Car Title Loan Bible.”