Possessing a reliable mode of transportation is essential to most people's lives. In most cases, they need a vehicle that does a little more than just take them from Point A to Point B. However, title loans can become rather expensive, especially with higher interest rates. For those people looking to refinance a title loan in Texas, all they need to do is follow a few steps.
The overall goal for refinancing a title loan is to lower that monthly payment. There are many factors at play, though, especially interest rates. The main reason a refinanced loan should be accepted is if the interest rate becomes lower. However, other fees might apply for the refinancing to take place, so a driver needs to be certain these fees do not raise the loan's monthly payment back up. Another benefit to refinancing a title loan is being offered the chance to build equity. Having equity can make a driver more marketable to refinancing situations in the future, too. Finally, being able to extend the length of time for which a car title loan exists can help with lowering monthly payments. Drivers need to be aware, though, that this factor might increase the amount of interest and fees they pay over time.
Why is a Fixed Rate Better?
When looking for a title car loan to be refinanced, the ultimate goal is to obtain a fixed interest rate. In other words, the interest rate does not fluctuate during a certain period. A fixed rate can last for a short-term loan, or it can last for certain time frames within a longer loan. Otherwise, the rate can change from month to month in some cases, which can also affect the monthly payment a great deal.
Credit Score is Not the Only Factor
Many title loan refinancing offices will perform a credit check before issuing a new loan. Often, they will look at improvements made to a credit score over time. More importantly, they might also take into consideration the routine manner in which payments were made on the original title loan. Therefore, a driver who struggles to make their payments on time might not find the refinancing options they seek. Furthermore, the goal of a refinancing situation is to lower the debt-to-income ratio. If changes have been made, for better or for worse, to a driver's income in recent months, then those factors will also be considered as part of the refinancing process.
Types of Title Loans
There are two types of title loans in Texas: a single-payment title loan and an installment-payment title loan. With single-payment title loans, the principle, fees, and interest rates need to be paid back in one, lump sum within two to three weeks after the loan is made. These loans are more difficult to refinance because of their short lifespan. This type of loan happens to be the most popular in Texas, with 75 percent of all title loans being under single repayment plans.
Installment-payment title loans, on the other hand, are a little bit easier to refinance because they have a longer lifespan. However, drivers need to be made aware that separate fees can be applied per payment, which can raise the payments being made. Hence, they are not as popular as a person might originally think.
Refinancing Between Loan Types
In most cases, it is more difficult to change an installment-payment loan into a single-payment loan. However, installment-payment loans can be paid off early, but certain fees might apply to closing the title loan before the end date originally negotiated. Single-payment title loans can be refinanced into installment-payment title loans, but more interest is usually charged, not to mention more fees. Therefore, the amount being paid back might cost more in total, even if it means having to pay back less in the short term. With this being said, a driver needs to take a close look at their financial situation before going with longer-term loans that might cost more at the end of the repayment period.
Frequency of Refinancing
In most cases in Texas, single-payment title loans are refinanced at least once. Over half, 73 percent to be exact, of all single-payment title loans were refinanced in recent years. Most of these loans were refinanced up to four times. It is important that drivers understand they need to pay off the interest rates and fees related to the previous loan before they can take on another loan that covers the principle amount.
Repossessions on Title Loans
When payments cannot be made and refinancing is not an option, then a CAB can repossess the vehicle related to the title on which the loan is placed. Single-payment loans tend to be the most popular loan type of repossessions. Therefore, drivers need to be aware of the depth of their debts before they take on any loan.
Texas's Laws on Title Loans
It is important to understand what rules to refinance a title loan in Texas. In most cases, interest rates can vary between 250 percent and 800 percent with annual percentage rates (APRs). At the same time, credit access businesses (CABs) are not limited by the state in what fees they can charge. The same goes for refinances and the ability to repay based on income. Origination fees can cost between $22.00 and $25.00 per $100.00 on loan, so drivers need to be aware of all fees for the sake of lowering their monthly payments. In some instances, refinancing a title car loan means that certain fees need to be paid a second time. This statement is especially true for CAB fees in Texas.
Going Through the Application
In most cases, are title loan application needs to be filled out before it can be refinanced. This new application provides a driver the chance to reflect changes in their credit score. Therefore, a lower interest rate might be available. In some cases, zero percent title loans might be available for those people with really good credit improvements. However, it is important to understand that gaining one of these title loan rates can be a little difficult.
Information to Bring Along
When a driver goes to meet with a title loan officer for refinancing, they need to bring a few things with them. If an application was filled out online before the meeting, then a copy of an e-mail confirmation related to it should be brought along. At the same time, paperwork on the original title loan should also be at hand. Budgeting ideas should be available during the meeting, too. Taking the time to perform some monthly budgeting before the meeting will save a great deal of time, and it will also let the driver know whether or not they can afford the refinanced loan. Other documentation might be needed as well, so the driver should call ahead to confirm what documents they need to bring.
Drivers can refinance a title loan in Texas with ease, but they need to be aware of the fees and interest rates before they make a decision since CABs are not limited in what they can charge. Therefore, coming into a meeting about refinancing a title loan with as much information as possible will give the loan officer a better chance of helping a driver to find a loan that meets their needs.