How to Invest in Payday Loan Companies

Payday lending is a profitable industry.

There is no doubt that payday loans are an extremely profitable part of the banking industry, and many investors are looking for a way to cash in on those profits. Investors can approach this unique segment of the banking world in a number of ways, from investing in traditional banks with a payday lending arm to seeking out companies that do nothing but payday lending.

Step 1

Open an account with a brokerage firm or mutual fund company. Before opening any account, be sure to ask about any fees or charges to which your account may be subject. Some brokers and mutual fund companies will charge maintenance fees for accounts under a certain dollar value, so be sure to ask about those charges as well.

Step 2

Complete the application form in its entirety. Be sure to provide complete information, including your name, address, phone number and tax ID or Social Security number. Some brokerage firms make their account opening forms available online, while others require applicants to complete a paper form.

Step 3

Consider investing in a traditional bank that also provides bad-credit lending and payday loans. Many mainstream banks have departments that specialize in these types of loans, and those parts of the business can be very profitable. Investing in a mainstream bank can be less risky than looking for a pure play in the payday loan industry. Buying a mutual fund that invests in the banking and payday loan sectors is another way to reduce risk while still capturing the profits of these companies.

Step 4

Use the stock screening tools available on the brokerage firm's website to identify public companies in the payday loan industry. These stock screening tools allow investors to choose a number of different criteria to find stock ideas, including industry sector, company size and earnings.

Step 5

Identify the stocks you wish to invest in, then contact the brokerage firm to make the purchase. In many cases you will be able to purchase the stocks or mutual funds online at the company's website, using funds already on deposit with the broker or mutual fund company.

Things You'll Need

  • Brokerage or mutual fund account

  • Investment funds

references