Title loans cancome in handy when some quick cash is needed. However, borrowers need to be certain they can meet the terms of those loans in order to ensure the best outcome. This article will cover what you need to know to get a loan and pay it off.Here’s how title loans work in Texas.
What is a Title Loan?
In exchange for pledging the title to your car, Texas title loan lenders will provide you with some cash to tide you over, cover an unexpected expense, or for whatever other purpose you might require. Short-term in nature, title loans usually run anywhere from 15 to 180 days in Texas. Your car, truck, motorcycle, boat or RV serves as collateral for the loan, so it’s likely you won’t encounter a credit check. However, you must have an unencumbered title to the vehicle.
Rules Governing Title Loans in Texas
Title loans lenders are limited to charging 10% interest. However,some “lenders” get around this by claiming to be aCredit Access Businesses (CAB), serving as middle people between borrowers and lenders. They process loan applications and make lending recommendations, for which they charge a fee, in addition to the interest the actual lender charges on the loan.
CABs can charge unlimited fees, but they must disclose the exact amount to the borrower before funding the loan. They must also provide comparisons with other lenders to facilitate informed decisions among borrowers.
There is also no limit to the amount for which a borrower can take out a loan. However, they must be certain they can repay the full amount due within 180 days. An initial 30-day title loan can be renewed five times before the initial amount becomes payable in full. If the borrower cannot make that payment, collateral is forfeited and sold.
Some Texas cities have additional rules. For example, Austin, Dallas, San Antonio, and Houston limit title loans to 3% of a borrower’s annual income or 70% of the vehicle’s market value, whichever is less.The city of Killeen, Texas, requires lenders to limit loans to less than 20% of a borrower’s monthly income.
Title Loan Interest Rates in Texas
Overall, interest rates on title loans in Texas are among the lowest in the U.S. Moreover, they have a term cap of 180 days. Generally, borrowers are charged an average of $21 for every $1,000 they borrow. The median loan term in the state is 29 days.
As mentioned, the interest rate cap is 10%. Again, though, most title loan lenders are not actual lenders. This enables them to get around the 10% rule by charging fees alongside the interest,since Texas title loan laws do not regulate CAB fees.
Qualifying for a Title Loan in Texas
The vehicle to which the title is attached must be lienfree. In other words, it has to be paid off. Borrowers must have proof of continuous income in an amount sufficient to cover the loan payments. Borrowers must be residents of the state and at least 18 years of age. A government-issued photo ID is required as well.
Lenders require the borrower’s full legal name, phone number, address, and date of birth. Specific details about the vehicle must be supplied as well. These include the make, model, year and mileage. Some lenders also require photos of the vehicle.
A vehicle can be seized if any payment is one week late. Further, lenders do not have to notify borrowers before taking vehicles. Fees resulting from a seizure can include tow costs, compensation for the person who took the car, rekeying costs and any fees associated with selling the car at auction.
What’s more, lenders are not obligated to refund the borrower the difference between the sale price and the total amount of fees. Further, lenders can go after borrowers for the difference, should the vehicle sale bring less than what is owed.
The state decides whether a vehicle can be sold and how much of the proceeds the lender can keep. Lenders are required to produce detailed records to support their assertions. Lenders must also give borrowers fair opportunity to pay off the loan before selling the vehicle. Lenders violating these rules can fined as much as $1,000.
Texas law also requires all title loan lenders to be licensed by the state. Lenders cannot make loans to military service members and no loan offices can be established within 50 miles of a military base in the state.
This is how title loans work in Texas. Given the latitude lenders have in the state, it’s a good idea to do some comparison-shopping before signing up with one. You want a lender who’s on the up and up, charges reasonable fees and stays on the right side of the line when it comes to working within the law.