Car Title Loan Profits
How profitable is a title loan business? What can a car title loan business owner expect to make by lending borrowers money in return for the title to their car?
Triple digit annual percentage rates (APR) are typical for our industry. A recent Missouri State Auditor’s Report revealed the average to be 200% to nearly 400%. Illinois approached 300%. Wisconsin averages 300%.
Here’s a link to The California Department of Business Oversight Report. It reveals 53% of title loans earned 70% – 99% APR’s and business increased 17% year over year!
So… how profitable is a title loan business?
What’s this mean to a car title loan company? You loan $1000 and earn $99/month in interest. Your borrower pays you nearly $600 in interest over 6 months. At the end of 6 months, your borrower still owes you the $1000 principal. Not bad!
In many states, Texas for example, typical fees on a $500 loan are 25% per month; $125 month interest only. Note that these are typical rates for auto title loan companies – sometimes referred to as “pink slip loans” having stores in states/provinces with fee caps. When operating in locales not having prescribed statutes you will experience even higher APR’s.
Additionally, it’s not uncommon for auto title loan companies to minimize their APR calculations by failing to compute them properly. This is not necessarily intentional. Many operators simply do not know how to calculate an APR correctly. This is not recommended. It can lead to serious problems, particularly after you become extremely successful. You will become a target (More on this in our How to Start a Car Title Loan Manual).