Lending money...

**CollegeBiz** · 07-07-2009 04:32 AM

I am thinking about starting a business of lending money to people. Something like Secure short term loans (3months) in which I would take a car or a home title and lend money to the person. Like a Pawn shop but in bigger assets.

I am from Mexico and in this country any person can lend money by signing paperwork with a notary and laying the terms in that paperwork.

The average interest payed in this type of loans is 12-15% per month. If the person does not pay you back in three months you get to keep the property or vehicle under the terms.

Lenders usually loan up to 15-20% of the value of a car or a house.

Lets say a house costs $100,000 in the market, the maximum loan you can make is $20k at an interest rate per month of 12-15%.

Lets say a vehicle's value is $40k I could lend $4k and if the person doesnt pay in three months I get to keep the vehicle and resell it at a cheap price in order for it to sell fast and I would still gain money from it.

I'm planning in investing $50k for one year and compounding 100% of earnings for one year.

Those $50k dollars would grow to around $190k-$250k if I compound the money.

What would you recommend me?
Does it sound as a good investment?

P.D.
I know people that do this in Mexico and have earned really good money.

**PsiPro** · 07-07-2009 08:13 AM

If its legal and you can afford to risk the $50k (always plan for the worst but expect the best) I think it sounds like a great deal.

**CollegeBiz** · 07-07-2009 10:23 AM

Yes it is legal the laws in Mexico allow you to do this. There is not much regulation on what interest rates to be charged. The only thing you need to do is register with a notary as a personal lender and prove where the money comes from. In my case I sold a property for $120k. Right now I'm trying not to spend any money from the sale and look for ways to invest it. I think that setting $50K to lend would be a affordable. I would not loan all the money to one person. I'm thinking I would probably be loaning 35-45k per month to 3-10 different persons. Assuming 1-4 of those persons will not pay in the first month and the others will. If the person doesn't pay in full by 3 months anything that was pawned would become mine. The process to be in full legal custody after something is not paid in full takes around 1-2 months. After those 4-5 months I would be able to sell something at a low price and still get 40-70% in interest gain.