Title Loan Laws in Texas

For fast cash, title loans are a popular option among borrowers. You can apply for a title loan and get the loan money that very same day, and approval rates are very high. If you're thinking of applying for a Fort Worth title loan, it's a good idea to understand how it will work and the laws that cover it.

Most regulations on title loan companies are set up by the states where those companies operate, which means you'll need to know the title loan laws in Texas. From the basics to the finer details, this guide to Texas title loans has you covered.

Basic Information on Title Loans

We'll start with what a title loan is and how it works.

A title loan is a loan against your car. It's a secured loan, just like any other loan that has the borrower's property attached as collateral. Keep in mind that the lender doesn't keep your car while you repay your car title loan. You'll have that, and they will only have its title.

You must meet two requirements to get a title loan:

  • You must own a car with a clear title.
  • You must be at least 18 years old.

The age minimum is a federal law. Since your car secures the title loan, it can't have any other lienholders on it. The title must be 100-percent clear, and you obviously need to have it in your possession to give to the lender. Fortunately, you're not out of luck if you lost the title, as you can get a replacement from the DMV.

Now that we've covered the basics, let's move on to title loan laws in Texas.

Interest Rates and Fees

Texas has set an interest rate limit on title loans, with the maximum being 10 percent. This is lower than in most other states. One thing to note is that a title loan can have other fees on it besides interest, which means the total cost could rise above that 10 percent. The lender must always provide a full breakdown of a title loan's costs to the borrower.

Maximum Amounts

This is one area where Texas doesn't step in with any caps. There isn't a maximum title loan amount in Texas, and instead, lenders are free to issue loans for as much as they want. Of course, lenders want to avoid unnecessary risks. To do so, they base the maximum amount they'll lend on how much the borrower's car is worth.

Here is the process lenders go through to decide on the amount they're willing to lend:

  1. They enter the details on the borrower's car, including its make, model, year and mileage, into a car value guide.
  2. They do a quick car inspection to see what condition it's in.
  3. They check the value listed for the car in that condition in the car value guide.
  4. They set the maximum vehicle title loan amount at a percentage of the car's value – between about 30 to 50 percent is common.

Theoretically, if your car is worth enough, you can borrow as much as you want through a title loan.

Term Minimum and Maximums

Title loans have always been intended as short-term loans. That's the reason why the most common length of a title loan term, both in Texas and in many other parts of the United States, is 30 days. Texas hasn't put a minimum on how long a title loan term needs to be, which means it could be longer or shorter than 30 days, but most lenders stick with that time frame.

Payment on the title loan is due when the term's up. The payment terms are a bit flexible, though, as the borrower can choose to pay only the fees and interest accrued on the loan to extend it into a new term. The new term will have the borrower's unpaid loan principal, and it will accrue its own fees and interest.

Texas has set up a maximum length on title loan terms, capping them at 180 days, extensions included. If a borrower extends their title loan enough and hits that 180-day mark, they must pay the loan off at that time.

Defaulting on a Title Loan

Although extending a title loan can cost the borrower a bit more, that's the far better option than defaulting on the loan. With your car as collateral, the lender can repossess it if you default. After that, the lender can sell the car, and you're left with no vehicle.

Title loan laws in Texas don't make the lender wait for any minimum time period before repossessing a car or selling it, which means that will depend entirely on your lender. Some could do it right away, whereas others may wait a few days or a week. It's better to avoid the risk entirely by communicating with your lender about any payment issues you're having, and extending the loan if you need to pay a smaller amount this time around.

That covers the ins and outs of title loan laws in Texas. When it comes to convenience, it's certainly tough to beat title loans. You don't need any financial records of yours to get one, you don't need to meet minimum income requirements and you don't need to go through a credit check.

It's obviously still important to make sure that you'll be able to pay back what you borrow. If you're confident in that, a title loan can be an excellent choice.