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Texas auto title loans
Though interest rates are capped at 10%, a loophole leads to APRs in the triple digits.
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.
Compare auto title loans in Texas
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Where can I get an auto title loan in Texas?
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.
Can I get an auto title loan online in Texas?
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.
- Compare your lender options in the table above.
- Visit the provider’s website and complete the application with information about you and your vehicle.
- Wait to hear back from a loans specialist about the rates and terms you qualify for.
- Set a car inspection appointment.
- Visit the lender’s storefront and bring any required documents.
- Have your car inspected.
- Finalize your application and receive your funds.
When visiting a provider’s site, always check that you’re applying through a secure page and that the lender abides by Texas laws.
What are the auto title loan laws in Texas?
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:
- Term limits of 180 days. No single loan can exceed a term of 180 days, including renewals or rollovers.
- License required. Both lenders and CABs must be licensed by the state of Texas to provide and facilitate auto title loans.
- Unregulated repossession. Lenders aren’t required to notify you or obtain a court order to repossess your vehicle.
- Loan terms must be clearly stated. Texas requires lenders to provide the full terms of your loan, including fees, interest charges and renewal costs.
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.
Why are interest rates so high?Auto title loan providers are able to skirt around Texas’s usury laws by acting as Credit Access Businesses (CABs), which are unregulated. Essentially, these CABs broker auto title loans between borrowers and third-party lenders. The lenders keep their interest rates below the legal limit of 10%, but the CABs charges high fees to arrange the loan. Through this loophole, Texas borrowers end up paying triple-digit interest rates on their auto title loans.
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.
Auto title loan requirements in Texas
Texas doesn’t have any specific requirements, but you’ll still need to meet basic auto title loan conditions to be eligible:
- Have a lien-free car title.
- Have a valid driver’s license or state ID.
- Be at least 18 years old.
A lender may have its own requirements you need to meet, so check on its website to be sure you qualify before applying.
Alternatives to consider before taking out an auto title loan
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.
- Local resources. Local government agencies, nonprofits and charities often offer free financial services and help with things like food or utilities for those in need.
- Loans from friends and family. Though it’s not the easiest conversation to have, your loved ones might be willing to help you.
- Installment loan. Available online and from some in-store lenders, installment loans tend to come with longer repayment terms and lower interest rates than auto title loans. This could be a good option for people looking to build credit, since many installment loan providers report payments to the credit bureau.
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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