Payday & Title Loan Collection Strategies

Payday Loan Collection Strategies

The 4C’s to Qualify for a Payday or Title Loan

As a payday or title loan lender, you know how easy it is to loan your money to borrowers. The hard part is convincing your borrowers to pay you back; as promised

I stress in our “How to make Money Lending Money Manual” that collections BEGIN the moment a potential borower visits your small dollar loan store or applies for a loan via your website.

There are a multitude of sub-prime consumer data “scrubbers” that have the ability to verify your small dollar borrower’s IP address, email, cell phone number, name, address, employer, bank account, social media presence…,

But ultimately, we lenders know lending money is about:

  • Collateral
  • Character
  • Credit
  • Capacity

Now, in the case of a payday loan, the collateral is your borrower’s job. 3 weeks on the job as a bartender is NOT going to fail to make my stomach queasy. [No offense to my favorite Newport Beach bartender!]

For title loans, lending is about the borrower having a free and clear title to the RV, car, truck, trailer… you get the message.

In order to mitigate his risk as a lender, Jason takes 4 factors into account when analyzing a borrower for a potential loan: collateral, character, capacity, and credit.

1. Collateral

How long has the borrower been on the job? How “strong” is their employer? Are you sure the employer phone number listed on the borrower’s application isn’t the cell phone number of her live-in boyfriend?

The job is the first and most important factor that I look at when qualifying someone for a loan.

2. Character 

Solid job? Let’s evaluate their character. I talk with the borrower in order to learn more about them. Why do they need a loan from me? What’s Google tell me about them? Who answers their phone when I call the number they’ve given me?

3. Capacity

During this sit down, Jason also wants to understand the borrower’s capacity to perform on the deal. He needs to know if they can make the monthly payments, if they can afford the down payment, and whether or not they have a clear exit strategy.

4. Credit 

Finally, after analyzing the borrower’s collateral, character, and capacity, I review their checking account statement. Other payday loan lenders listed? One might be OK. 2 or more? Forget about it!

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Evidence og gambling? Probably not. Strip joints? maybe not. A negative bank balance 2 days after payday? Probably not. NSF’s ? No go!

Finally, I check them out with one of my sub-prime consumer reporting agencies before making a final decision.

This is not rocket science folks! It’s about PROFITS!

Get organized. Use the tools I discuss in our Payday and Title Loan Manuals and you WILL make money by lending money.