I am interested in starting a payday loan service - Is it as people tell me, so risky I may lose?
People are telling me that the percentage of non-payment is so high, that it wipes the potential earnings. I would like to hear from experts in this arena, what is the truth.
My first question for you is about ethics. You want to make money on a disadvantaged sector of our population who have few choices. Is this a service or a money maker?
The other is, I don't know the law in Nebraska but payday lending is essentially illegal in Ohio. It is now masked as a mortgage in some fashion but it is highly regulated. Better know the law and where you are going.
As for defaults, they get priced into the interest rates. You better be funded well enough to handle the float. Also, you will need to be a vicious bill collector (there are two reasons why the glass is so thick on the window at a payday lender, theft and regret).
Well, in every business there are pros and cons, so is the loss and profit. However, there one thing know as calculated risk taking which may have some loss superficially, but because this is cash business you should be prepared for this gamble. Most of the time the loss is covered by the insurer and the banks also know about this concern.
I am not more knowledgeable in this however, I have some of my business customers who I provide a security to their business they may know little bit more. I would suggest you do some research on the business in depth and then make your mind on whether to proceed with this risk and see a safer business which does not exist. Business is risk from day one and that is why people don't venture unless they are prepared to take that risk.
The truth is (and sorry to be blunt about this), Payday loan services take advantage of honest hard working people, some of whom - in most cases - do not know how to manage their finances.
The business structure is such that it leaves the poor in poverty cycles, with high interests (sometimes worse than credit cards). Perhaps the percentage of non-payments is high because they are poor to begin with.
If you have money to invest, invest in something that provides value to communities plus good profits for you.
Don't. The risk to you is very high in term of loss.
The majority of the people who use these facilities are either desperate or alternatively bent. You will probalby never find them again if they are "professional" defaulters.
Then there is your image, and psyche.
The PayDay loan brigade have a lot of bad press; and as a Credit Manager in my view rightly so. Interest rates of 1700% APR are obscene, and the excuse that many lenders make is loss -v- peoples need for money does not wash. If your collection "techniques" are going to be on a par with the notorius international ones as WOGNA, PayDay Loans and Quick Quid ( the latter in the UK) leave much to be desired.
In any case the type of person you are lending to are going to be two ends of the extreme: Timid and withdrawn; or outright violent and destructive. In all seriousness, if you are going to do this on a small time basis, expect to have your wiindows smashed and./ or your head kicked in !
Only if you wish to sale your soul at other expense. More and more states are making it illegal or very difficult to run such a business.
as much as I agree on the comments below regarding ethics and taking advantage, there was a time in my life when I myself had to resort to a payday loan. In my humble opinion, this business can be helpful and profitable at the same time. First, just make sure your interest rates are below the industry standard. You can catch up on the profit by-volume. Second, to minimize risks, there must be a way for you to ensure timely payments. (I can elaborate later on)
I have handled a contact center who offers financing, although it's for small and medium businesses, the same principle applies. We offered way-better rates so we can help while making reasonable profits. And while some people think it's taking-advantage of someone else's needs, who else would help them if not the financing companies? Bank loans will cripple them further because of the interest rates. I've heard lots of stories (first hand) where a loan, even with interest, helped save if not further grow their business.
These are unsecured loans, needs high interest rate to cover-up anticipated losses. Also, occasionally you need services of bouncers for recovery.
I agree with Mr. Bishop. There's a different between what is legal and what is right. Why not aspire to something beyond whether or not you make money off the less fortunate?
I can help. This is not a straightforward business set up. Very profitable but needs to be properly set up in first place
Off course it is risky, as per my marketing knowledge you can do refinance program , even I can help you in that case, reach me Skype: sathishkumar.kasinathan
Thanks so much for all the responses. And of course, I do my homework... Department of Banking and Finance and I already met a couple of times. Anyways, the majority of you bring up good points. I appreciate your input.
PayDay loan people need to rot in hell. Figuratively speaking.
Find a different business.
Only if you wish to sell your soul at other expense. More and more states are making it illegal or very difficult to run such a business.