AVOID DEFAULTING
ON A TITLE LOAN

If you reside in Texas, you live in one of the more expensive places to take out an auto title loan. Because of loopholes in state law, lenders can charge exorbitant fees on car title loans. While it's good that so many customers can qualify, these fees and high interest rates often leave borrowers unable to make their payments. Some consumers will lose their vehicles and have no other form of transportation. Others will successfully repay the amount borrowed and reclaim the pink slip with no problem. Try to understand how the process works so there are no issues with any financial decision. That's why you must make an informed decision when signing off on auto equity financing.

Loopholes For Title Loans in Texas

Online title loans were first designed for individuals who couldn't qualify for a personal loan to use their vehicle as collateral for a cash loan instead. Title loans are perfect for someone with bad credit, and you sometimes borrow up to 70% of your vehicle's value. However, title loans also come with extremely high interest rates, and it can take years to repay your loan if you only pay the minimum amount each month.

If the applicant can't make the monthly payments, they default, and the vehicle can be repossessed. Most auto title loans are short term loans intended to meet an immediate need, like overdue bills or utilities. A common term length in Texas is a month, after which the applicant owes more than the original loan amount. Some people end up rolling over the loan to avoid losing their cars. This quick fix compounds the interest and increases fees even further. That leaves them in a position where they don't have enough time to repay the money without risking repossession of the car's title.

Know The Loopholes Regarding Title Loan Laws

Many states have enacted laws to protect against “usury” or overcharging for vehicle equity financing. Local jurisdictions, such as San Antonio, have introduced new title loan laws over the past few years; however, these lending restrictions have notable loopholes. Not only does the law not cap the number of title loans anyone can have at one time, but it also doesn’t cap the fees you see over each monthly payment. Lenders might point out that actual interest rates on these loans will max at ten percent, but that’s deceptive. These interest rates are assessed on a monthly basis, and the APR for a title loan in Texas can exceed 30% per month. It's much the same in larger metro areas like Dallas and Fort Worth, which is why you need to know about the available title loan loopholes.

The average cost of title loans in Texas comes with a high APR (annual percentage rate) of up to 300%. These rates are high because lenders assume a higher risk. Much like payday loans and cash advances, there will be higher rates for individuals who can't prove their income or can't qualify due to a poor credit report rating. Anyone considering a title pawn should understand these rates and pay off the loan as soon as possible. We know it's not always easy to pay off a loan before it comes due, but a title pawning company should be open to working with you to reduce the interest payments over the life of your loan.

Some title loan lenders can also exploit legal loopholes to circumvent the purported ten percent cap on interest. As mentioned above, some companies offering title loans in San Antonio and Dallas are subject to local lending restrictions; however, they often find ways to circumvent these restrictions. They do this by registering as a CAB or Credit Access Business. With this method, the company acts as a go-between between the lender and the consumer who borrows money. The CAB fees don’t count as interest, so the ten percent cap doesn’t regulate them. The actual lender has an interest rate of ten percent or less, and everything appears to be in order.

How Much Can You Borrow With An Auto Title Loan

Regarding protecting consumers, Texas car title financing laws still have one saving grace. Different citywide restrictions in Texas regulate the amount of time for a payday advance and other secured loans. For example, new laws limit payday loans to a matter of weeks for repayment. Whether it's a cash advance or an auto equity loan, the same regulations apply. In this case, the state’s rules prohibit loan terms from exceeding 180 days. If a borrower were to take out an original loan on a thirty-day term, that loan could only be renewed five more times. The protection here lies in the fees and interest charges for car title loans with no credit check, which increase with every rollover.

Repayment terms range from 12 to 24 months, with a fixed payoff term. This also means the borrower can’t buy more time with another rollover. Sometimes, this means they will be facing the repo man. There are local laws in some Texas cities that protect consumers facing a title loan repossession. For instance, regulations in Dallas restrict auto title lenders to a specific area of town. In San Antonio, lenders are limited in the dollar amount of title loans they can offer.

Other Title Loan Loopholes To Know

Texas law permits a lender to repossess a car if the borrower is even a day late making a payment. In actual practice, few online companies will jump and make a big deal about it. They get more money from the borrower by allowing them to roll over the loan and continue making payments. A title loan repossession is an expensive undertaking that doesn't come easily to any finance company or bank. It often involves a third-party repo company rekeying and auctioning the repossessed car. A lender will undertake that expense once they’ve wrung as much money out of a borrower as they can. That happens if you default on a direct deposit title loan in Texas. Contact us at 844-243-3195 to get help with your loan.