Editor's choice: Max Cash Title Loans
- No bank account required
- No prepayment penalty
- Bad credit OK
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If you have poor credit and struggle qualifying for traditional financing, auto title loans can be a convenient way to cover unexpected expenses life throws at you. But Texas places very few regulations on these short-term loans, and many businesses use a loophole to charge high fees that lead to APRs in the triple digits. Although these title loans can be helpful in a tight spot, you could lose your car if you fail to repay.
You can find auto title lenders at physical stores throughout Texas, especially in large cities like Dallas, Austin and Houston. But even if you don’t live in a major hub, you can likely find an auto title loan shop near you due to the growing short-term loan industry.
If you don’t want to spend hours at a title loan store, many allow you to start the application process online and then ask you to come in to have your vehicle inspected. This can speed up the borrowing process and get you the money you need faster.
Unfortunately, there aren’t many lenders that work entirely online. The inspection process is to ensure that your car is in good condition if it needs to be repossessed. Because of this, almost every auto title lender requires you to visit a lot and have a physical inspection before you’re approved for a loan.
Although you can certainly apply for an auto title loan online, you probably won’t be able to complete the entire application process without visiting a physical location.
Each lender has its own process, but in general, you can expect to go through the following steps.
When visiting a provider’s site, always check that you’re applying through a secure page and that the lender abides by Texas laws.
Texas places very few regulations on auto title loans. The interest rate cap is set at 10%, but you’ll find many lenders are actually Credit Access Businesses (CABs) — businesses that facilitate loans between borrowers and lenders that are unregulated. Don’t be surprised if your APR is in the triple digits. This is because Texas doesn’t set a limit on the fees lenders can charge, which average to about $23 per every $100 borrowed.
Other notable laws include:
Some cities have their own ordinances that regulate auto title loans further. These can include restricting lenders from operating in certain areas or requiring loan amounts be based on a person’s income. Check your local laws to make sure your lender is operating legally on a state and city level.
For example, if you were to take out a $10,000 auto title loan with an interest rate of 10% and the average fee of $23 per $100 borrowed, you’d have an APR of about 192%. That means you would owe your lender $12,453.96 for a 60-day auto title loan. And while this APR is certainly lower than some payday loans out there, the total amount you owe in the end can be staggering.
Texas doesn’t have any specific requirements, but you’ll still need to meet basic auto title loan conditions to be eligible:
A lender may have its own requirements you need to meet, so check on its website to be sure you qualify before applying.
With sky-high interest rates and the risk of losing your car, a costly auto title loan could be risky when you’re not in financial shape to pay it back on time. You could save money and avoid an auto title loan by looking into lower cost — and sometimes free — alternatives.
Although auto title loans are easy to get when you’re in a financial crisis, you run the risk of making your problems worse if you can’t repay in time. Texas’s lack of regulations means these short-term loans can get expensive. And if you can’t repay it within six months, your lender can repossess your car without warning. As short-term loans, they can be helpful in emergency situations but shouldn’t be used to cover long-term financial issues.
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