What are Car Title Loans in Texas?
Car title loans offer borrowing options to people who have poor credit. While other lending institutions like credit unions and banks will pull your credit report to decide whether or not to grant you a loan, title loans Texas accept the original title to a car you own to secure the loan. The lender keeps your title while you pay off the loan. If you pay it off in full, you get your title back. However, if you don't make your payments, then you're facing a car title loan repossession Texas.
A car title loan repossession Texas happens when you aren't making your loan payments and you're avoiding talking to your lender. Since the lender has your title, and in your loan documents you've agreed to surrender your car if you don't make your payments, he has the right to take possession of your car. This is the worst possible outcome of getting a car title loan. An honest lender won't want to take this step. Instead, he'll give you every chance to come in and create a new payment plan that fits your budget so you can continue paying off your loan.
Title Loans: When Things Go Wrong
According to the Texas Fair Lending Alliance, car title loans are typically more expensive than loans from traditional lenders. This is because title lenders are taking more risks by offering loans to people who have damaged credit. In some cases, lenders are loaning money to people who don't have jobs. Auto title lenders are in the business of providing money to people who are in need, people who are being turned down by everyone else. They're taking a big chance that their customers may not be able to pay them back. That's why their interest rates are higher than other establishments.
If the lender is reputable and fair, his interest rates and loan fees are highly visible in his office. By Texas law, he has to take extra steps to make sure his customers understand the debt they're taking on, how much their payments are going to be and how much they will ultimately pay once the loan is settled. Even Texas online title loans are subject to these fair lending practices.
Even so, sometimes people take on these loans without fully understanding the payment plans. Other times, people run into further financial trouble after taking on the loans and find themselves unable to continue making their payments. Luckily, there are Texas title loan relief solutions for situations like these.
How to Avoid Car Title Loan Repossession Texas
Losing your car is the last thing you want to happen. How will you get to work without your car? How will you take care of your family? Not having a car severely limits your freedom.
The first step to avoiding a repossession is understanding the terms of your loan. Ask questions. If you don't understand, ask again until you do. Be realistic about the money you're going to repay. Compared to other lenders, it can seem like a lot. For every $100 you borrow, you may end up repaying $125. A typical $1000 loan, then, could ultimately cost you $250 in interest fees.
Paying $250 for a $1000 loan may not seem so bad when you have poor credit and no one else is willing to lend you money. However, title loans usually have short repayment terms, usually two to four weeks in length. That means if you borrow $1000 on the first of June, you'll be expected to pay $1250 in full by the first of July. According to The New York Times, customers often "rollover" their principle payments because they can't afford to pay the full amount so soon. A rollover happens when you pay just the interest (in this example, $250) and extend your full loan for another month.
This is where people get in trouble. When you rollover your loan, that interest payment does nothing but buy you time. It doesn't lessen the amount of money you owe. So, after paying $250 to extend your loan for another month, you still owe the full amount of $1250 the next month. Many people rollover loans several times before they pay them off. In this example, if you rollover your loan for six months, you will have paid $1500 in rollover fees and will still owe $1250.
So, the second step to avoiding repossession in an auto title loan is to only borrow what you know you can pay back in full in a very short time frame. Don't ignore this extremely important aspect of your loan. It could wind up costing you a great deal of money. In fact, it could wind up costing you your car.
Work with Your Lender
If you're already committed to your loan and you realize you can't make your payments, talk to your lender. Most lenders care about their customers and want to help them pay off their loans. You may be able to work out a way to pay your loan off in full over several months instead of just a few weeks. You may also be able to lessen the amount of interest you owe. For example, if you can pay $1175 instead of the full $1250, you may be able to get your lender to agree to let that satisfy the debt. This depends entirely upon the lender, though.
Unscrupulous lenders who only care about money may not be interested in helping you. Since car title loans are largely unregulated in Texas, they may hope to take your vehicle and sell it for as much money as they can get. It's unfortunate that some lenders are this greedy, but it happens.
In this case, you may need to consider a Texas title loan buyout. This is when another title lending company in Texas buys your loan from your current lender and you become their customer instead of the original lender's.
We buy out title loans for our customers all the time. We're happy to rescue our clients from predatory lenders who don't care about them. We're interested in making life-long customers out of everyone who walks through our doors, and we can't do that if we're taking people's cars away from them. So, we'll work with you to help you pay off your loan and get you back on your feet.
Title Loans Can Still Help You
Title loans are still good alternatives for people who don't have access to traditional forms of credit, like personal loans, lines of credit at their banks or credit cards. However, if you don't fully understand the debt you're carrying, they can quickly turn disastrous.
Always borrow from a reputable lender. Ask questions before you sign anything. Make sure you totally understand every aspect of your loan. Also, make sure you're financially capable of repaying the loan in the length of time specified by your contract. Don't borrow more than you need to and only borrow if you genuinely need the money. It's a very poor idea to enter into a title loan just to finance a shopping spree. On the other hand, it's a viable option if you're facing foreclosure and you're weeks away from a financial windfall.
The bottom line is, title loans can help you tremendously if you understand what you're getting into and you know you can afford them.
The Best Way Out of a Car Title Loan in Texas
Texas is one of the states that embraces car title lending the most. Auto equity loans Texas are very easy to get, with the average loan being about $1,000 and some going much higher than that.
But because these loans are so easy to get, some people jump in without counting the cost first. Then, they find themselves with a title loan they want to get out of. If that person is you, here are three of the most effective ways to get out of your title loan.
- Just pay it off. If you've got the money or you can work extra hours, pay the loan off ahead of time. Many lenders don't have pre-payment penalties if you pay your loan off early. It will save you time, headache and interest costs if you go this route.
- Negotiate. You may be able to get your lender to settle your account for a smaller lump fee than what your loan account is worth, especially if you have cash in hand.
- Refinance with a better company. If you're locked into a loan with a disreputable lender, go to a good one and ask them to buy the loan out. They'll probably buy your loan for less than you can pay it off, then charge you lower interest rates.