Your Rights and Legal Protections with Auto Title Loans in Texas

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. These fees often leave borrowers unable to make their payments. Some consumers will lose their vehicles and have no other form of transportation. Others will successfully pay off the amount borrowed and get the pink slip back 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 Auto Title Loans in Texas

The underlying premise of most online title loans is offering a vehicle as collateral for a cash loan. 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 place where they don’t have enough time to pay the money back without suffering repossession of the car’s pink slip.


Know The Loopholes Regarding Title Loan Laws

Many states have enacted laws to protect against “usury” or overcharging for vehicle equity financing. Local jurisdictions like San Antonio have introduced new regulations over the past few years, but these lending restrictions have loopholes. Not only does the law not cap the number of potential title loans, 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. On top of the interest, they charge finance fees, and those are not limited. It’s much the same in larger metro areas like Dallas and Fort Worth, and that’s why you need to know 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 of the increased risk lenders take. Much like payday and cash advances, there will be higher rates for people who can’t prove income or can’t qualify because of a poor credit report rating. Anyone considering a title pawn understands these rates and pays off the loan in the shortest time possible. We know about their ability to charge finance fees.

Title loan lenders can also use legal loopholes to get around the supposed ten percent cap on interest. As mentioned above, these loopholes are restricted in larger cities like San Antonio and Houston. 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 all appears well.


An applicant looking for details about title loan loopholes online.


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 a payoff time. Be it a cash advance or auto equity loan, the same regulations apply here. 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 increase with every rollover.

Repayment terms vary from 12 to 24 months with a set 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 like Dallas and San Antonio to protect consumers. The regulations in Dallas restrict auto title lenders to a specific area of town. In San Antonio, they limit 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 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. Repossession is an expensive undertaking that doesn’t come easy 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. So contact us at 844-243-3195 to get help with your loan!