Setting up a Payday loan company

triggerrabbit

I think that you're quite right in asking questions, customer research, sounds like you know what you're doing and its better to be better than other companies and make more business for yourself. Just a shame that certain individuals cant see past the end of their nose and have stick it in everywhere. No one is forced to use these services so let people make their own decisions

pink_princess

It is an expanding market ,it has grown year on year and shows signs of growth already again this year.
Its a hard business to be in though,if your talking face to face payday loans (which is the easiest legal wise on licensed premises) you ll have people begging for more just 1 week into the month you ve already loaned them for a limit increase.You become their saviour who soon months later becomes their enemy,you cant/wont survive 6 months without coming down tough on non payers,businesses like this work on 70-80% word of mouth business,once one person goes bad debt you ll get hit with a spate.
On the debt front the industry average is 22% but there are businesses achieving 17% debt targets.
This is not a nice business to be in no matter how well meaning you are.
PP

alliballi

battyboimatt wrote: »

Sorry Immoral yes getting great stugg back but it just annoys me that when serious posters with lots of previous posts, actually does post they get accused of being a Troll, it just annoys the hell out of me, oh how MSE has slid, it used to be a great place, but these days not so nice and warm.

I cant give you advice but I totally agree with what you say about the MSE board sliding, looking at so many posts on this forum there is always catty or nasty comments or people start bickering, too many egos now and people who beleive in their own hype, sad makes you not want to ask anything anymore, but good luck in what you do I think you will suceed as long as your careful and dont gamble too much of your money away.;)

Snakeeyes21

If you can get the money to people within 15 minutes 24/7 charge the interest per day, no early repayment fees then you will be on to a winner.
I will say you will need a hell of a lot more finance to do it, take wonga as an example, they got 3 million in the first round of funding. then 28 million a few months later.

WTTM

So OP.......

With a £30k loan pot.

Admin fees, bad debts, working capital lost interest, i.t. systems, credit licence, advertising, business set up costs, salaries and so on.

What kind of return to you expect to make in Year 1, Year 2 and Year 3 ?


MOMENT

myothercarisaferrari

No £50 :-(

jamesd

battyboimatt, better to start out at closer to the usual rate and be prepared for very high default rates.

One of the concerns with payday loans, and one of the things that can make the companies so profitable, is the number of customers who take out a new loan when the first one ends. If you want to be socially responsible you could offer past customers decreasing rates depending on how many past loans they have had with you, which might give some indication of their reliability and hence their level of risk.

Once they have been a customer for several repeats you might consider whether they are suitable for very subprime loans for six months in the 400-600% APR range to lower their borrowing cost to a level closer to that offered by doorstep lenders. This would both lower your costs and potentially keep the repeat customers around instead of having them try to switch to cheaper lenders as soon as they are able.

You should also visit www.lenderscompared.org.uk, the site set up by the Office Of Fair Trading as a result of its review of the doorstep lending market a few years ago. That will give you some potentially useful information on competitors in your local area like that example search showing rates for £100 borrowed with APRs from 1069% for some of the cheapest to 448% for some of the most expensive. The lower APR for the more expensive loan isn't an error, total cost for credit is £40 for the cheaper one, £50 for the more expensive.

If you're putting your data on a computer with SSQ encryption and your data is on the same server you're going to have some problems. First, SSQ encryption doesn't exist so it's not supported by any web browsers, so nobody will be able to use it. Second, putting your database on a web server is reckless and irresponsible and shouldn't be done, because it allows a successful hack of the web server to compromise all of your data. You should have a database server on a different box and use middleware on a different box from the web server to access the database, with the middleware layer only allowing a specific set of approved operations to come from the web server. That way a compromised web server can't so easily be used to grab all of the data. The middleware and database boxes shouldn't really have internet-routable IP addresses either. To get started you might put each piece in a virtual machine until you can afford something more.

Gorgeous_George

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...

At 29.9%, a loan of £500 returns £584.63 (not £649.50).

With these types of loans the biggest costs are administration fees and default rates. You need to charge enough to cover the non-payers.

Don't give up the day job.

GG

battyboimatt

Hi all thanks for the responces so far, I was going to create a new topic but just thought I would dump it in here instead, depending on the responce I might start another, Im looking fo people who have used payday loans companys to complete a survey I threw it together quick online www.peggserv.net Ill thorw in an insentive of a £10 voucher to one lucky survery winner. Regards

Matt

rainbowfairydust

battyboimatt wrote: »

Hi all thanks for the responces so far, I was going to create a new topic but just thought I would dump it in here instead, depending on the responce I might start another, Im looking fo people who have used payday loans companys to complete a survey I threw it together quick online www.peggserv.net Ill thorw in an insentive of a £10 voucher to one lucky survery winner. Regards

Matt

Just completed your survey ,