Most people read about the pros and cons of a title loan and fully expect us to say there’s no real downside for someone who wants an online car title loan. But that’s not always the case when you’re talking about a loan that comes with risk and a high interest rate. We all know options are limited in Texas when you need emergency funding. Of course, a payday loan is always available as an option, but the rates on an unsecured loan with no credit check are out of control. Often, cash advances will carry rates that are double or triple what you see from a licensed auto title lender in Texas.
The pros and cons of other lending options are more obvious than if you got an online title loan in Texas. You can look into an installment loan or bank financing. Of note, there are many banks in Texas where you can apply for a personal loan. However, those types of loans are very difficult to qualify for. You’ll need good to excellent credit and even then some banks and credit unions will deny you if you can’t prove employment or banking information. Taking out an online title loan is often the last resort. While using your vehicle as collateral can be beneficial there are real downsides and risks that come with this form of funding. Let’s discuss what can legally happen when you apply with a company like Texas Title Loans.
Without a doubt, the biggest risk that comes with auto equity financing is the possibility of getting your car repossessed. This will only happen if you fall behind on monthly payments. Even then, a repossession doesn’t mean you can’t get your car back. The State and cities like Austin, Dallas, and San Antonio have title lending ordinances in place. Some specifically protect consumers who are in this exact situation. Check on the latest Texas rules and regulatory updates, but you can count on a certain amount of days before the lender sells your vehicle. To avoid this fate, it’s imperative to make monthly payments on time and not fall behind. Contact your online title loan company if you foresee a possibility of default. Most loan companies will work with you to set up an alternative payment plan. It costs a lender a large sum of money to repo your car and waits the required amount of days as Texas law requires.
High interest rates are one of the cons of a Texas title loan
There’s no escaping this fact. Any local company that allows you to get a title loan with no direct deposit will have hefty finance charges. You can count on restrictions for how much your lender can charge, but they’re still going to be high. As mentioned above, these types of online loans aren’t for everyone. Rates are high because there’s a huge amount of risk for the lender that you could default. We always tell borrowers in this situation to get ahead of the payments. Just because you have a 24 month payoff term doesn’t mean you need to stick to those terms. Do what you can to make early payments and make sure your lender allows early payment. The sooner you pay off the full balance of a car title loan means you will no longer be paying huge finance charges.
A lender will place a lien on your vehicle as a form of collateral
When a title loan company places a lien on your car that means they have first rights to it. The lender will essentially own your car until the full loan amount is paid back. Consider that most online title loan companies operate under this same method. The borrower will hand over their pink slip and still be able to keep driving the vehicle. On that note, we know of some online title lenders who treat your loan as a vehicle pawn. This means they will lend you a sum of money but keep your vehicle as collateral. Some of these companies may no longer be able to provide loans in Texas. Contact your local city or state regulator for more information.
Ultimately, no one wants to hand over possession of their pink slip. But that’s the only way a company will lend a large sum of cash. As was the key to all other downsides we discussed above, you really only have two options as a Texas resident. First, don’t get a title loan. Instead, work with a traditional bank lender that’s registered(if your credit score is good enough), or borrow money from friends or family. The second option is to take out a title loan and pay it back as soon as possible. By doing this you avoid the risk of repossession. You will also pay as little fees as possible and upon full payment, you will get the pink slip back!