What Should You Know Before You Get a Texas Title Loan
Getting a loan is an important financial decision. If youāre a Texas resident and your credit isnāt perfect, you may consider borrowing against your paid-off car, truck or SUV. Before doing so, itās a good idea to understand the applicable title loan laws in Texas, so you can make an informed choice.
Are Title Loans in Texas Regulated?
Yes! As in many states, title loans in Texas are regulated financial products. Whether you live in a large city in the Lone Star state like Houston or San Antonio, or a smaller one like Mansfield or San Angelo, title loans are governed by applicable laws that are overseen by a regulator.
The applicable laws and regulator depend on the loan provider you choose, as title loans can be available through different options.
Title Loans through Credit Access Businesses
Credit Access Businesses in Texas, also known as CABs, assist Texas consumers in finding a title loan provided by a 3rd party lender. Besides trying to find customers on behalf of the 3rd party lender, the Credit Access Business usually also acts as a loan servicer, which means that the title loan borrowers will make their loan payments to the CAB, instead of the lender. The Credit Access Business typically guarantees the loan performance so as to lower the lenderās risk of a default of the title loan. In exchange for providing the loan guarantee and brokering the vehicle-secured loan, the CAB charges a fee to the consumer. This so-called CAB fee is disclosed to the consumer before signing the loan agreement, normally expressed as a percentage of the amount borrowed.
All Credit Access Businesses in Texas must be registered with and licensed by the Texas Office of Consumer Credit Commissioner.
Other Title Loan Options
Banks: While many Texas residents obtain title loans with the assistance of a Credit Access Business, other financial services companies may offer vehicle-secured loans through other enabling laws. This can for example include loans offered by state banks (licensed in Texas or other states) or nationally chartered banks. Banks are subject to federal laws and the laws and regulations of their home states.
Tribal loans: Some financial enterprises known as ātribal lendersā may also offer title loans in Texas. These companies, which are headquartered and usually operating on land owned by federally recognized Native American tribes primarily offer bad-credit loans over the internet, including to Texas residents. While somewhat controversial, tribal loan providers claim to be subject only to the laws of their respective tribe.
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Consumer Rights When Borrowing Against Your Vehicle in Texas
No matter which loan provider or loan option you choose, as a borrower, you have a right to make an informed choice when taking out a loan. This means that you should be informed about all key loan terms before signing a title loan agreement. The disclosures should include:
- Your duties as a borrower
- The cost of borrowing, expressed as an Annual Percentage Rate (APR)
- The loan amount, payment amount and repayment schedule
- What events would constitute a loan default, and what the consequences would be
- Any restrictions that might apply to the use of the vehicle while the title loan is outstanding
When comparing your loan options, be sure to pay close attention to the APR and interest rate, and make sure youāre comfortable with the monthly payments and schedule.
How Local City Ordinances in Texas Can Impact Title Loans
If you choose to use a Credit Access Business in Texas to borrow against your vehicle, itās good to be aware that there may even be regulations on the city-level that apply! These ordinances, which for example are active in Dallas and Austin, establish local rules that can apply to both title loan providers and payday lenders that are offering financial services as a Credit Access Business. While these rules can vary from one city to the next, they may establish real estate zoning requirements for loan store operators, limit the number of allowed loan rollovers, or impose limits on key loan terms like the loan amount or maximum allowable payment-to-income ratio for residents of the applicable cities.
Conclusion About Title Loan Laws in Texas
Being informed about your rights and responsibilities as a title loan borrower in Texas is a good first step before applying for credit. Title loan borrowers in Texas have the right to make an informed decision before taking out a loan. Taking advantage of all required disclosures allows residents of the Lone Star state to compare their options, and borrow responsibly.
Depending on the title loan option you choose and your city of residence, borrowing against your vehicle may be subject not only to federal laws and Texas state laws, but also city ordinances.
