How to Start a Title Loan Business
by Luke Arthur
1. Become licensed in your state as a title lender. Many states require lending companies to get a license before they can begin lending to consumers. You may need to take an exam and pay a fee to get the license. Besides the state license, you will also need to purchase a business license from your local government.
2. Register a business name for your title-loan company with the local county clerk's office. This process involves filling out a form and paying a nominal one-time fee.
3. Incorporate your business or set up a limited-liability company. Both of these options can help protect your personal assets in case one of your customers decide to file a lawsuit against you. If you want to incorporate, you will need to file articles of incorporation with your state and pay a filing fee. If you choose to use a limited-liability company, you will need to file articles of organization and pay a fee.
4. Find a location in which you can do business. Locating your business in a high-traffic area would be best so that you can get people to come in as they drive by. Lease a location in a prime commercial area that is near other businesses.
5. Set up terms that you will offer to your borrowers. You will need to develop some legal contracts that help protect your interest as a lender and make sure that borrowers are held responsible for the debt. Determine the interest rate that you will offer and the late fees if payments are not made on time.
6. Buy the appropriate equipment for your business. For this type of business, you will not need much equipment, but you will need basic office items. For example, you will need a computer system that can keep track of your loans for you, a telephone system and some office furniture. You will also need to buy an attractive sign for the front of your business.
7. Promote your title-loan business. In many cases, you can advertise on the radio and television for an affordable rate. Putting ads in the newspaper and on billboards can also be effective.
- Outline the consequences of default clearly for your customers. Let them know that if they do not repay the loan, you will repossess their vehicle and sell it.
- Title lending is a risky business. In some cases, your customers will not repay you and you will have to rely on repossession and the sale of the vehicle to recoup your costs.