Setting up a Payday loan company

battyboimatt

Hi All,

Don't shoot me down in flames, I have the opportunity of going into business with a friend and we have thought about opening a new Payday Loan company, I know there are a fair few around, but we want to be different, we want to make profit but not at the expensive of people most companies change £25 per hundred pound so we were thinking of charging £15 per £100 pound back. We have looked into things are in the process of applying for the consumer credit licence which is £970, we have about £30,000 to invest in the business to start out with. What I’m asking is people opinions about experiences they have had with payday loan companies, how they applied, their experience, what attracts them to a particular company etc, how they applied, how quick they got the money, what options were they offered, any help would be appreciated. Thanks

immoral_angeluk

With all due respect, I think you should maybe not ask on a board where 99% of the people who've had payday loans would happily march up to their local one with a flaming pitchfork...

PROLIANT

Rather than a Payday loan company why not look at a sub-prime lending business model....with a difference?

Offer loans between £50 to £1000 at a sensible APR, for example 29.9% as this would entice people to borrow form you (who struggle in mainstream borrowing), use Experian for credit checking potential clients where by you could charge the client for the credit check and if they are approved refund the credit check fee in the form of a payment holiday or something and if they get declined they don't pay anything for the credit check.

This way you can absorb the Experian fee in your lending structure, just some thoughts as it is very hard to get a personal loan these days.

Good luck.

myothercarisaferrari

can I have 50quid matalan have a sale on wooo

immoral_angeluk

myothercarisaferrari wrote: »

can I have 50quid matalan have a sale on wooo

:rotfl::rotfl::rotfl::rotfl::rotfl:

battyboimatt

immoral yes I know people would want to pitch fork some of the providers but that is where we want to be diffrent, I mean hell, I've been there, done that, I was young and careless and runied my credit for 6 years when I as 18, now im 28 and my files are clean I have lots of green zeros and run things well, thats why I want to help people out, I dont want to rip them off and take them over the edge.

Prolliant, brilliant idea in fact I really like it, of course this all depends on the OFT granting us a credit licence, which is £970 a year and if you apply and they turn you down you get nothing back lol,

And myothercarisaferrari yes of course £50 isnt too little, we were considering lending people from £25 to £700, I hope I havnt offended any one with this post, I was really only hoping for feedback from people etc like I said I have been there myself and know how hard it is, Id set up a debt collection agency and be nice and accept everyone's £1 a month offer but I dont think any company would use me then lol, so any feedback etc appreciated, espcially prolliant,

Thanks All Matt

myothercarisaferrari

well can I be your first customer? And as your first customer, £50 with no charges, I can pay you back on 21st April when I get my first pay from my new job:money::money:

Thats why I need to go to matalan y'see - work clothes:D

immoral_angeluk

The trouble is you're targetting a very vulnerable market. Too many payday loan companies are glorified loan sharks. What you need to do is strike a balance between a responsible lender and a subprime lender, that is treating customers fairly and not taking advantage of their vulnerablility, and not jumping straight onto defaulting and CCJs because they're a month late. You also need to be willing to work with clients who may be in huge financial difficulty and feel that a payday loan is their only option where it is really only going to compund the problem. I think it would be a good idea to incorporate some kind of debt advice system in with the company and to work with people in financial difficulty and referring them to other sources such as CAB, national debtline etc if a payday is just going to make their problem worse. For those where the payday loan would be appropriate and not making matters worse, you should have a fair fee structure and some flexibility with regard to people who end up not being able to pay back straight away.

PROLIANT

Example, you could offer a loan for say £500 for 12 months @ 29.9% APR, total cost of the loan would be £649.50, you could absorb the credit check fee in to this so lets say for the sake of arguement that you buy a bank of 100 searches from Experian for £500, you can use these as you go sort of thing so if your average loan amount is £400 per person and you lend to 100 people that would equate to £5 per borrower for the cost of the credit check, 29% for the capital loan and 0.9% for the credit check fee.

If you use this a rule of thumb when calculating the cost of lending you can set the represented figures how you please e.g. £100 @ 29.9% APR could be broken down on the books as 24.9% for the loan an 5% admin fee = 29.9%?

magpiecottage

I fear your plans may be fraught with problems.

First of all, you will have to persuade the OFT to grant you a consumer credit licence.

You also need to sort out your contracts - without falling foul of the unfair terms in consumer contracts regulations.

You will need to have proper systems in place to ensure you maintain accurate records of customers' accounts.

That in turn means you need to make sure that data is secure and you are registered with the Information Commissioner.

You need to set up, and operate, a fair Complaints Procedure (even if you never need it). There are strict rules on this - exactly the same as my clients are bound by.

Your customers will be able to take you to the Financial Ombudsman Service if you cannot resolve a dispute.

So think carefully before jumping

battyboimatt

myothercarisaferrari well done on the new job and how is your new life in the North East Ive been a North East Boy all my life. Immoral_angeluk yes I know we will be targeting a high risk market and your absolutely correct I wouldn’t want to burden people beyond there means, we were already looking at credit checking people but of course been more linnet with adverse data, for example someone who had two defaults and about 40 or 50 percent use of credit we would borrow to, however someone with 8 accounts 8 defaults etc I wouldn’t borrow to and refer them onto CCS or Citizens Advice, If we were unable to lend I would also recommend credit unions etc, like I said been there myself I know how tough it is. Yes I would be willing to help people out, and if they were unable to afford the loan I would suspend interested and only add a one off charge of say 6 - 8 pounds which would be "Un-payment Fee" which would only be payable once and then would stop Interest as well, we would of course then be open to a repayment pay with no Interest, only over abuse of this etc would result in a default of further action i.e. they agree to pay £2 per week and then never paid anything, I would contact them again to see why and then give them a second chance, if they say they cant afford it, id be willing to accept less as long as they pay, if they broke this a second time I would issue a letter saying they may risk a default if they do not start to pay or negotiate a payment, after that it would be a default, three strikes and your out, I mean you cant say fairer than that. Ive already cost bad debt into my business model, still waiting for prices from Experian and Equifax, see I just wanted to consult and who better than real people who may have had difficulties and that Prolliant I still like your idea, I mean with £30'000 im sure we could do both, ill have to discuss it but thanks for the replies I really appreciate it all guys.