What is a Texas Title Loan?
A Texas title loan is a loan where the loan applicant offers the title to an asset, most usually a car, as collateral to secure a short-term loan. Title loans, in general, last around 30 days, have higher APRs (up to 300% APR in unregulated states), and are for sums typically between $1,000 and $10,000. That being said, title lending varies greatly state-to-state due to the fact that the industry is not regulated at the federal level. Therefore, we’ll be taking a look at the specific rules Texas has in place for title lending. For a more broad exploration of title lending in general, please see our comprehensive title lending page here.
First, Texas-based title lenders must be registered. Texas has no limits on how large a title loan can be, but it does restrict interest rates at 10% per month, or roughly 215% APR, which is hardly better than the uncapped national average of 300% APR, a rate many states have found to be predatory. Despite the fact that there are no limits set on how long a title loan can last for, Texas mandates that credit contracts not exceed 180 days, meaning that a 30-day title loan can only be renewed 5 times before the loan amount is due in full. In the case of a defaulted loan, Texas title lenders can repossess the titled asset immediately, with no grace period or notice to the debtor. Also, in what, again, is seen by many analysts are predatory, surplus funds resulting from the repossession and resale of an asset (after the original loan, accrued interest, and legal fees have been deducted) are not returned to the debtor, but rather kept by the lender.
Finally, Texas is one of the few states that allows for local authorities to legislate on top of state legislation. Some cities, such as Dallas, have specific legislation relating to title lending, so we recommend further research for individuals in large municipalities that may have enacted legislation relating to title lending.
Texas law stipulates that interest rates on title loans cannot exceed 10% per month, or roughly 215% APR.
Texas title loans have no credit checks. At most, you will be expected to apply with a valid ID, proof of income, and other cursory paperwork such as proof of residency.
The specific statutes regulating the Texas title lending industry fall under the Code of Alabama 1975 (5 §§ 393.001-393.628) and state the following:
Maximum Interest Rate: 10% per month (~215% APR)
Maximum Credit Contract: 180 Days (5 renewals of a 30-day contract)