Title lending is a tough business to be in. The risk is high, and the competition can be cutthroat. To succeed, you need to minimize the chances of default while increasing your loan volume. Finding the right balance between quality and quantity can be hard, but there is one strategy you should consider to attain it: repayment via plastic.
Partnering with a company specializing in credit card processing for title lenders is not free. It may even increase your overhead a lot because of the potential high chargeback rate associated with the business you are in.
However, the cost of accepting credit card payments is worth it. Here is why plastic repayment can help you overcome the usual pain points in the title-lending sector:
Allowing your customers to use plastic can help keep your financial losses to a minimum. Although you offer secured loans, you know that vehicle repossession does not guarantee that you can break even. Letting your customers roll over their loans in perpetuity knowing they may never be able to repay you may hurt your brand.
The acceptance of credit cards can be an elegant solution. Paying with plastic allows your customers to buy more time to repay what they owe. There is no telling whether they can settle their credit card bills afterward, but at least you no longer bear the risk of financial loss since you are already paid.
Credit card usage can be addictive because of points and rewards. Understanding that they can get something in return whenever they use plastic, your customers have an extra motivation to pay what they owe you in full and on time.
Furthermore, allowing your customers to pay extra without penalty can help your customers meet sign-up bonus requirements. Since such introductory deals are time-sensitive, processing credit card transactions can help you curb late payments.
Providing them with a digital channel to pay via plastic provides convenience. Third-party credit card payment processing platforms are widely available, but consumers are penalized with sizable extra fees. Providing an alternative medium with no or a smaller cost helps keep more money in your customers’ pocket.
Encouraging Credit Building
Title lenders have never been known to be consistent data furnishers. Many consumers know that their title loan repayments are likely not to improve their credit scores over time.
Accepting credit card payments changes this mindset. Credit card issuers are perhaps the diligent data furnishers. Even if your company does not submit consumer data to credit bureaus, you may use credit building as a selling point to attract more business. Knowing that their punctual payments will not go unreported can give your customers another reason not to fall into arrears on their title loan.
Moreover, shrewd consumers use credit card ledgers to monitor their spending. Being able to track their financial activity can help them be better payers.
Credit card payments are not without downsides, but their benefits often outweigh and outnumber their drawbacks. Accept plastic ASAP to give your company the edge over other competitive title lenders.