Setting up a Payday loan company

immoral_angeluk

PROLIANT wrote: »

Wrong Newcastle, never mind. A few hundred miles too far south. :beer:

boooo... you'll have to accept a virtual one then



:beer::rotfl:

FATBALLZ

'BattiBoi Matt's Payday loans' - I like it. It's better than 'Mr Money' anyway.

Ritchie74

Where will you get the money from to lend? £30k wont go far if you are lending up to £700 a time. Also, do payday co's have to reserve any monies? I'm not close to payday companies rules and regs so I'm not sure myself.
If you are happy to be paid back with nominal amounts, what's the incentive for people to pay you back at the agreed rate? With your proposed model wouldn't every borrower take advantage of your kindness?
With so little coming back in each month, how will you fund more loans? What magnitude of bad rates have you factored in, as stated previously you should be looking at 25%. Nice idea but I can't see how you wouldn't be running at a loss. Are you paying your staff decent salaries (in financial services you are looking at more than minimum wage for back office). Even at minimum wage, it's a lot to pay out when you only have 30k to start with, much of this you will need to lend out. Then there's employers NI, pension contributions, sick and maternity pay & cover.

ixwood

Never a lender, nor a borrower be.

I can't see how it's possible to be a nice subprime/pay day lender. People get charged extortionate rates, because they're very likely to not pay it back.

You have to make enough from the ones that do pay back to cover all the other losses.

KPR11

battyboimatt wrote: »

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.

someone correct me if I am wrong (I have not had a payday loan for a few years now) but don't you get this rate with money shop? in my experience, they called me a few days before my cheques were to be banked to check whether i want to extend it! (maybe this is something you want to incorporate in your model)!!

Million dollar question is, why would someone want to use a relatively new entrant when they can use an established national company?

Good luck with the business, do keep us posted on how its coming along!

PS: I am not recommending money shop or anyone. IMHO, if possible, payday loans are to be avoided at all costs.

Nomorechocolate

PROLIANT wrote: »

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%?

Unfortunately, that interest rate calculation is considerably adrift and any advertising or loan agreement using such misunderstood figures would not be a way to keep a Consumer Credit Licence.

Charging an APR of 29.9% for a £500 loan over 12 months actually returns around £74.50 . If payments are being made monthly, for example, then the APR to return £149.50 is something like 65.23% .

You have to remember that the interest is not payable on the original amount of the loan for the full 12 months - the chargeable balance reduces throughout the year. Only if the agreement was for NO REPAYMENT until the end of month 12, would 29.9% generate your £149.50 .

There are plenty of APR calculation tools on the Net. The Mercer and Hole one is easy to use.

Charging for searches is not entirely a new idea, but I suspect it may limit acceptance decisions to those who are not sub-prime, which may be a bit off-target for a short-term loans business where you are lending to those who have been declined elsewhere.

For information, I am licensed by the OFT for both credit brokering and debt collection.

inmypocketnottheirs

Have you set any of the 30K aside as a provision for bad debt?

hullight

Yeah, tbh you might as well just chuck the £30k out of a moving car because between people with problems getting interest frozen, people moving house and not telling you and people who just had no intention of paying anything back you are probably not going to see much of it come back.

Maybe there is a way to invest in a credit union and make money that way, or lend your money on that loan marketplace, Zopa is it?

CHR15

MSE would hardly be the place it is today if people actually repaid the money they have borrowed.

As soon as they borrow from you,, they will post on here about how unfair it was and get lots of help on avoiding any kind of repayments.

May as well put the £30k on Red in Vegas, much better chance of a return.

If you are going to enter into money lending, you need absolutley NO MORALS, nor feelings for the customer.
Be nice for as long as it takes to get their business, then take the gloves off..... most of them won't be paying you back.

battyboimatt

Hey guys, thanks, was intresting in reading some replies, and all on red in vegas, noo I went twice last year and the most i stuck in was a $50 into a slot in ceasers palace and I won $600 lol, I took the money out and cashed in lol, well guys, thanks so far for the points, all taken onboard, will keep you updated