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How to Start a Car Title Loan Business in 2023

Do you want to start a car title loan business? If YES, here is a 20-step guide on how to start a car title loan business with no money and no experience.

If you intend starting this type of business, it is advisable to first look at the existing laws and zonal regulations in the country or state you reside in to know what is expected of you. You also need to pay a visit to the regulatory bodies in your country to get all the information you need before you can legally open your  car title loan business in your city.

You can start your car title loan business from a small town in the United States and if you are good at what you do, it won’t be too long before your brand becomes a nationally recognized brand especially if you go into franchising.

Steps to Starting a Car Title Loan Business

Table of Content

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1. Understand the Industry

A title loan which is also known as a car title loan is a type of secured loan where borrowers can use their vehicle title as collateral. Borrowers who get title loans must allow a lender to place a lien on their car title, and temporarily surrender the hard copy of their vehicle title, in exchange for a loan amount.

When the loan is repaid, the lien is removed and the car title is returned to its owner. If the borrower defaults on their payments then the lender is liable to repossess the vehicle and sell it to repay the borrowers’ outstanding debt. The car title loan services industry is indeed in a mature stage of its growth.

The industry is characterized by growth in line with the overall outlook of the economy, consolidation from the largest players in the industry and wholehearted market acceptance of industry products and services. The payday loan services and check cashing line of business will continue to be in high demand by the general public in the United States,

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Car title loan loans are typically short-term, and tend to carry higher interest rates than other sources of credit. Lenders typically do not check the credit history of borrowers for these loans and only consider the value and condition of the vehicle that is being used to secure it.

Despite the secured nature of the loan, lenders argue that the comparatively high rates of interest that they charge are necessary. As evidence for this, they point to the increased risk of default on a type of loan that is used almost exclusively by borrowers who are already experiencing financial difficulties.

If you apply for a car title loan, you can get it in 15 minutes or less on loan amounts as little as $100. Most other financial institutions will not loan under $1,000 to someone without any credit as they deem these not profitable and too risky.

In addition to verifying the borrower’s collateral, many lenders verify that the borrower is employed or has some source of regular income. The lenders do not generally consider the borrower’s credit score.

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It can’t be ruled out that the nature of the car title loan services industry gives room for it to perform well during the recession. This is because, as consumers struggle during difficult economic times, they used industry services to advance their paychecks or to get quick cash back.

As the economy continues to recover and consumers start to fatten their wallets, there is the likelihood that the demand for the industry services will decline.

Moreover, industry regulations have been increasing, hampering revenue growth and profit margins for firms in the car title loan services industry. Lastly, starting a car title loan business in the United States requires that you get the necessary permit and license to be able to operate in any city of your choice, and you are expected to meet the required capitalization.

2. Conduct Market Research and Feasibility Studies

  • Demographics and Psychographics

The demographic and psychographic composition of those who patronize car title loan services cut across all genders; male and female above 18 years who own automobiles hence the demographic composition for car title loan services business is all encompassing. In essence, your target market can’t be restricted to just a group of people, but all those who own automobiles.

So, if you are thinking of launching your own car title loan services company then you should make target demographics all encompassing. It should include all automobile owners in and outside the neighborhood where your car title loan services company will be located.

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3. Decide Which Niche to Concentrate On

It is important to state that there is no known niche area when it comes to car title loan services. It is a niche idea in the financial services industry but some car title loan firms may decide to concentrate only on online clients – operating online services business as against brick and mortar services.

The Level of Competition in the Industry

The competitions that exist in the car title loan business goes beyond competitions with car title loan services companies; you will be expected to compete with financial institutions and payday and check cashing services firms that that also offer loan services. So, it will be right to say the competition in the business is tough.

The truth is that no matter the level of competition in an industry, if you have done your due diligence and you brand and promote your services or business properly, you will always make headway in the industry. Just ensure you are well – capitalized, your workers are well – trained, your loan processes are smooth, your customer care services is top notch and you know how to attract and reach out to your target market.

But over and above, there are several car title loan services companies scattered all around the United States. So, if you choose to start your own company in the United States, you will definitely meet stiff competition amongst car title loan companies and also other financial institutions that also offer loans within your location.

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Besides, there are larger brands that determine the trends in the industry and you should be ready to compete with them for customers.

4. Know Your Major Competitors in the Industry

Here are some of the most popular car title loan services companies in the United States of America;

  • Highway Title Loans
  • TMG Loan Processing
  • Capitol Lending
  • CarTitleLoans123
  • MaxCash Title Loans
  • American Auto Title
  • Premier Title Loans
  • Champion Title Loans
  • North Eastern Lending
  • Ace Cash Express Loans
  • Today’s Financial Services
  • Fast Title Cash
  • One Way Title Loans
  • Luxury Performance Auto
  • Instant Car Equity Online
Economic Analysis

If you are looking towards successfully launching a business and maximizing profits, then you need to ensure that you get your economic and cost analysis right and try as much as possible to adopt best practices in the industry you choose to build a business in.

Car title loan services business is no longer a green business, as a matter of fact, you will come across several car title loan services when you drive through town or search both online and offline directories.

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So, if you are mapping out your economic and cost analysis, you should carry out thorough market survey and costing of what is required to secure steady flow of cash (capitalization), business license, software apps and also the cost to successfully run the business.

Over and above, if you are considering starting a car title loan services company, then your concern should not be limited to the cost required to secure a business license and running the business, but also on branding and on how to build a robust clientele base.

The truth is that if you are able to build a robust clientele base (owners of automobiles in and around your location), you are sure going to maximize profits in the business.

5. Decide Whether to Buy a Franchise or Start from Scratch

There is no hard and fast rule when it comes to choosing how you intend starting a business. Basically, you should be guided by your overall business vision and mission statement. If you are looking towards starting a car title loan services company, you would have to start from the very scratch because you can hardly get the franchise of a car title loan company to buy.

Besides starting a car title loan services company from the scratch is less stressful when compared to other related businesses which usually requires detailed groundwork. With car title loan services company, you should just try as much as possible to pool the required cash then leverage on every marketing tool within your disposal especially the internet when it comes to marketing your company.

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Please note that most of the successful car title loan companies around started from the scratch and they were able to build a solid business brand. It takes dedication, hard work and determination to achieve business success.

6. Know the Possible Threats and Challenges You Will Face

If you decide to start your own car title loan services company today, one of the major challenges you are likely going to face is the presence of well-established car title loan services companies within your business location. The only way to avoid this challenge is to create your own market.

Some other challenges and threats that you are likely going to face is economic upturn; if the economy is in good shape, car title loan services companies and the likes usually struggle to get customers to collect loan. Unfavorable government policies can also hamper the growth of your company.

7. Choose the Most Suitable Legal Entity (LLC, C Corp, S Corp)

You have the options of either choosing a general partnership, limited liability company, or a sole proprietorship for your car title loan company. Ordinarily, sole proprietorship should have been the ideal business structure for a small – scale car title loan business especially if you are just starting out with a moderate startup capital in a small neighborhood.

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But if your intention is to grow the business and have offices all across the United States of America, then choosing sole proprietorship is not an option for you. Limited Liability Company, LLC or even general partnership will cut it for you.

8. Choose a Catchy Business Name

When it comes to choosing a name for your business you should be creative because whatever name you choose for your business will go a long way to create a perception of what the business represents. Typically, it is the norm for people to follow the trend in the industry they intend operating from when naming their business.

9. Discuss with an Agent to Know the Best Insurance Policies for You

In the United States and in most countries of the world, you can’t operate a business without having some of the basic insurance policies that are required by the industry you want to operate from. Thus, it is imperative to create a budget for insurance and perhaps consult an insurance broker to guide you in choosing the best and most appropriate insurance policies for your business.

Here is some of the basic insurance policies that you should consider purchasing if you want to start your own car title loan business in the United States of America;

  • General insurance
  • Health insurance
  • Liability insurance
  • Risk Insurance
  • Credit insurance
  • Deposit insurance
  • Financial reinsurance
  • Lenders mortgage insurance
  • Workers compensation
  • Building/Property insurance
  • Overhead expense disability insurance
  • Business owner’s policy group insurance
  • Payment protection insurance
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10. Protect your Intellectual Property With Trademark, Copyrights, Patents

If you are considering starting your own car title loan services business, usually you may not have any need to file for intellectual property protection / trademark. This is because the nature of the business makes it possible for you to successfully run it without having any cause to challenge anybody in court for illegally making use of your company’s intellectual properties.

But if you just want to protect your company’s logo and other documents or software that are unique to you or even jingles and media production concepts, then you can go ahead to file for intellectual property protection. If you want to register your trademark, you are expected to begin the process by filing an application with the USPTO. The final approval of your trademark is subjected to the review of attorneys as required by USPTO.

11. Get the Necessary Professional Certification

Aside from the results you produce as it relates to return on investment (ROI), professional certification is one of the main reasons why some car title loan firms stand out. If you want to make impact in the industry, you should work towards acquiring all the needed certifications in your area of specialization.

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You are strongly encouraged to pursue professional certifications; it will go a long way to show your commitment towards the business. These are some of the certifications you can work towards achieving if you want to run your own car title loan services firm;

  • Certified Payday Loan Lenders
  • Bbb Certified Payday Loans Operator
  • Degree in Finance Related Courses

Please note that you can successfully run a car title loan services firm in the United States without necessarily acquiring professional certification as long as you have adequate experience cum background in the financial services industry.

12. Get the Necessary Legal Documents You Need to Operate

It is a fact that you cannot successfully run any business in the United States without the proper documentations. If you do, it won’t be too long before the long hands of the law catch up with you. These are some of the basic legal documents that you are expected to have in place if you want to legally run your own business in the United States of America;

  • DBA
  • EIN
  • Business and liability insurance
  • Federal Tax Payer’s ID
  • State Permit
  • Certificate of Incorporation
  • Business License
  • Business Plan
  • Employment Agreement (offer letters)
  • Operating Agreement for LLCs
  • Insurance Policy
  • Online Terms of Use (if you have a website)
  • Online Privacy Policy Document (basically for online payment portal)
  • Company Bylaws
  • Apostille (for those who intend operating beyond the United States of America)
  • Memorandum of Understanding (MoU)
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13. Raise the Needed Startup Capital

Starting a car title loan services firm can be cost effective. Securing a standard office in a good business district, equipping the office and paying your employees are part of what will consume a large chunk of your startup capital. No doubt when it comes to financing a business, one of the first things you should consider is to write a good business plan.

If you have a good and workable business plan document in place, you may not have to labor yourself before convincing your bank, investors and your friends to invest in your business. Here are some of the options you can explore when sourcing for startup capital for your car title loan services firm;

  • Raising money from personal savings and sale of personal stocks and properties
  • Raising money from investors and business partners
  • Sell shares to interested investors
  • Applying for loan from your bank
  • Source for soft loans from your family members and your friends.

14. Choose a Suitable Location for your Business

Car title loan services require that you see physically with your clients hence it must be located in good location; a location that is prone to both human and vehicular traffic and a location that is at the epicenter of a business district if indeed you want to attend to loads of clients.

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The fact that you can operate your car title loan services firm from any part of the world does not mean that location has little influence on the success of the business. If you have taken your time to study the industry, you will realize that car title loan services businesses and related businesses are willing to pay expensive rents in order to stay in a busy business district; a place where business and financial activities are at its peak.

It cannot be overemphasized that the location you chose to open your car title loan service is key to the success of the business, hence entrepreneurs are willing to rent or lease a facility in a visible location; a location where the demography consists of people who own cars and have sources of income.

If you make the mistake of renting or leasing a facility in a not too visible or hidden location simply because it is cheap, then you must be prepared to spend more in promoting the business and perhaps giving direction to potential clients.

It is important to note that a business facility in good location does not come cheap hence you should be able to allocate enough fund for leasing/renting in your budget. If you are new to the dynamics of choosing a location for your business, then you should feel free to talk to a business consultant or a realtor who has a full grasp of the city and perhaps country you intend starting your car title loan services firm.

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Of course, you would not want to locate this type of business in the outskirts of town. Your clients should be able to drive down and locate your office with little or no difficulty.

15. Hire Employees for your Technical and Manpower Needs

There are no special technology or equipment needed to run this type of business except for customized loan services software and other financial related software apps. Also, you will need computers/laptops, internet facility, telephone, fax machine and office furniture (chairs, tables, and shelves).

When it comes to choosing between renting and leasing an office space, the size of the car title loan services firm you want to build, and your entire budget for the business should influence your choice. If you have enough capital to run a standard car title loan firm, then you should consider the option of leasing a facility for your office.

As regards the number of employees that you are expected to kick start the business with, you would need to consider your finance before making the decision. Averagely, you would need a Chief Executive Officer or President (you can occupy this role), an Admin and Human Resource Manager, Fund Manager/Portfolio Manager, Risk Manager, Accountant, Business Development Executive/Marketing Executive, Loan and Check Cashing Officers, Debt Collectors, and Customer Service Officer or Front Desk Officer.

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Over and above, you would need a minimum of 10 to 20 key staff to effectively run a medium scale but standard car title loan services firm.

The Service Delivery Process of the Business

Basically, a borrower will seek the services of a lender either online or at a store location. In order to secure the loan, the borrower will need to have certain forms of identification such as a valid government-issued ID like a driver’s license, proof of income, some form of mail to prove residency, car registration, a lien-free car title in their name, references, and car insurance, though not all states require lenders to show proof of auto insurance.

Please note that the maximum amount of the loan is determined by the collateral. Typical lenders will offer up to half of the car’s resale value, though some will go higher. Most lenders use Kelley Blue Book to find the resale value of vehicles. The borrower must hold clear title to the car; this means that the car must be paid in full with no liens or current financing. Most lenders will also require the borrower to have full insurance on the vehicle.

Depending on the state where the lender is located, interest rates may range from 36% to well over 100%. Payment schedules vary but at the very least the borrower has to pay the interest due at each due date. At the end of the term of the loan, the full outstanding amount may be due in a single payment.

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If the borrower is unable to repay the loan at this time, then they can roll the balance over, and take out a new title loan. Government regulation often limits the total number of times that a borrower can roll the loan over, so that they do not remain perpetually in debt.

If the borrower cannot pay back the loan or is late with his or her payments, the title loan lender may seek to take possession of the car and sell it to offset what is owed. Typically lenders choose this option as a last resort because it may take months to recover the vehicle, and repossession, auction, and court costs all decrease the amount of money they are able to recoup.

During this time, the lender is not collecting payments yet the vehicle is depreciating. Most states require the title loan lender to hold the vehicle for 30 days to allow the borrower to recover it by paying the balance. Any amount from the sale that is over the existing loan balance is returned to the defaulter.

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Today, the internet has revolutionized how companies can reach their clientele, and many title loan companies offer online applications for pre-approval or approval on title loans. These applications require much of the same information and still may require a borrower to visit a store to pick up their money, usually in the form of a check. When filling out these applications, they may ask for things like the vehicle’s Vehicle Identification Number (VIN) and/or insurance policy numbers.

It is important to state that a car title loan services company may decide to improvise or adopt any business process and structure that will guarantee them efficiency and flexibility; the above stated business process is not cast on stone.

16. Write a Marketing Plan Packed With ideas & Strategies

The fact that the entry barrier for starting even a small – scale car title loan services company business is high does not mean that more players won’t want to come into the industry if they have space. In essence, you must come up with unique marketing strategies if you must carve out a market for yourself.

So, when you are drafting your marketing plans, make sure that you create a compelling company profile. Aside from your qualifications and experience in car title loan services industry, it is important to clearly state what you have been able to achieve in time past. This will help boost your chances in the marketplace.

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Here are some of the platforms you can utilize to market your car title loan services business;

  • Introduce your car title loan services company by sending introductory letters alongside your brochure to owners of automobiles, car dealerships and other key stake holders throughout the city where your company is located.
  • Advertise on the internet on blogs and forums, and also on social media like Twitter, Facebook, LinkedIn to get your message across
  • Create a basic website for your business so as to give your business an online presence
  • Directly market your services.
  • Join local car title loan services company associations for industry trends and tips
  • Provide discount days for your customers
  • Advertise our business in community – based newspapers, local TV and radio stations
  • List your business on yellow pages ads (local directories)
  • Encourage the use of word of mouth marketing (referrals)

17. Work Out a Reasonable Pricing for your Services & Products

One key factor that will help you offer your car title loan services at a price that is highly attractive is to ensure that you source your working capital from sources that won’t put pressure on you or give you high interest rate. Another strategy that will help you offer your services at the right price is to ensure that you cut operational cost to the barest minimum, and channel your efforts towards marketing and promoting your brand name.

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Aside from the fact that this strategy will help you save cost, it will also help you get the right pricing for your products and services. So also, if you are able to secure business partnership as it relates to getting referrals, then you will be able to maximize profits from your business.

18. Develop an Iron-clad Competitive Strategies to Help You Win

The availability cash in demand, your business process and of course your pricing model as it relates to interest are part of what you need to stay competitive in the industry.

Another possible competitive strategy for winning your competitors in this particular industry is to build a robust clientele base. Over and above, ensure that your organization is well positioned, key members of your team are highly qualified and your services and products can favorably compete with the some of the best in the industry.

19. Brainstorm Possible Ways to Retain Clients & Customers

When it comes to business, no matter the industry that you choose to pitch your tent in, one of the easiest ways to increase customer retention and perhaps attract new customers is to produce results and satisfy your customers always. If your customers are satisfied with your products and service delivery, they can hardly source for alternative service providers.

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If your services and customer service fluctuate, you are likely going to struggle to get your customers retaining your services. Ensure that you offer your customers incentives if you want to retain them and of course continue to generate repeated sales from them and also attract new customers.

Part of what you need to do to achieve this is to track progress, results or outputs with the aim of improving on them quickly as the case demands. When it comes to managing your customers and building a loyal clientele base, you should purchase a customized CRM software.

With a customized CRM system, you can easily stay in touch with your clients (you can carry out quick surveys, you can introduce new products and prices to them without any hitch, you can felicitate with them on their birthdays and other anniversaries, you can keep track of their progress, you can send bulk sms and customized e – mails and above all, you can easily receive compliant and feedback from them).

20. Develop Strategies to Boost Brand Awareness and Create a Corporate identity

If you are in business and you are not conscious about boosting your brand awareness and communicating your corporate identity, then you should be ready to take on whatever the society portrays your business to be. One of the secrets of larger corporations is that they are willing to spend good money to boost their brand awareness and to continue to communicate their corporate identity the way they want people to perceive them to be.

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No matter the industry you belong to, the truth is that the market is dynamic and it requires consistent brand awareness and brand boosting cum promotion to continue to appeal to your target market. Here are the platforms you can leverage on to boost your brand and create a corporate identity for your car title loan services company;

  • Place adverts on both print (newspapers and auto magazines) and electronic media platforms
  • Sponsor relevant community – based events / programs
  • Leverage on the internet and social media platforms like; Instagram, Facebook, Twitter, YouTube, Google + et al to promote your car title loan services company
  • Install your Bill Boards on strategic locations all around the location where you have your office
  • Distribute your fliers and handbills in target areas
  • List your car title loan services company in local directories / yellow pages
  • Advertise your car title loan services company in your official website and employ strategies that will help you pull traffic to the site.
  • Position your Flexi Banners at strategic positions in the location where your car title loan services company is located.
  • Ensure that all your staff members wear your branded shirts and all your vehicles are well branded with your company logo et al.