The loan approval process is very important in the payday loan business as making too many bad loans will ensure your money will never return. It is critical that you have these policies written out before you open the doors and never make exceptions, even though the person sitting across from you is really nice. Nice does not pay the bills and you are in business to make money and the likelihood that you would get anything back in a lawsuit is small.
Credit reports can be a good first indicator but many borrowers will have little to bad to no credit history and should not be used as the only indicator, however many payday lenders don’t run them. Other indicators of likely repayment include work history, pay stubs, tax returns, checking accounts, debit cards, debt-to income, home ownership or length of time at one home/bank for signs of stability. Also fixed income clients are good because their income while small, it is stable.
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