If you’re in need of money and you own a car, there’s a way that you can turn your car title into cash with a title loan. Even though it’s known as a title loan, a car title loan or occasionally a pink slip loan (because you’re giving the title, a “pink slip,” to the lender), the actual collateral on the loan is your car.
The federal government leaves most title loan regulations up to the states. You may be wondering, what are the requirements for a title loan in Texas? We’ve got the Texas title loan info you need if you’re thinking about getting one.
The Rundown on Title Loans
If you’re used to the typical loan process that occurs when you go through a traditional lender, you’ll be in for some surprises the first time you get a title loan. To prepare you for this, here are five shocking facts about title loans:
1. The Title Loan Company Won’t Run a Credit Check
Your credit score is that number that lenders use to figure out your credit worthiness, which they use to decide how much of a default risk you present. This determines not only whether they approve or deny your loan application, but also the kind of annual percentage rate (APR) they’ll offer you.
Not so with title loans. One thing all title loan companies have in common is that they don’t run a credit check on you, because approval for the loan depends entirely on your car. By the way, no credit check also means no hard credit inquiries dragging your score down a few points.
2. You Could Get Your Title Loan Within One Day
There’s no lengthy loan application process here. Other lenders could keep you waiting for weeks before deciding if you’re approved, and then take another few business days just to issue your loan.
With a title loan, you’re looking at one business day to get your loan at most. In most cases, you simply go to the title loan company’s location, go through the application process, and get your money that same day. The process often takes under an hour.
3. Title Loan Interest Rates Can Vary Quite a Bit
Interest rates are one area where title loan companies receive criticism. APRs are often well into the triple digits. It’s important to keep in mind that title loan companies need to charge higher APRs because they often lend money to high-risk borrowers who are far more likely to default.
Another thing to remember is that title loan interest rate limits are set by the state, which means they’re much different depending on where you get the loan. In Texas, the interest rate limit is only 10 percent, although fees can lead to additional monthly charges.
4. Title Loans Are Available in Texas for 0-Percent Interest
One type of title loan that you’ll find in Texas but not in most other states is the 0-percent title loan, featuring a 0-percent interest rate during an introductory time period. Now, after that intro period is up, the interest rate will go up or you will need to refinance the loan, if you can’t pay it back.
If you use these loans correctly, you’re essentially borrowing money free of charge. The key is making sure you can pay back your title loan on the due date before that into period ends.
5. You Could Borrow Thousands of Dollars Through Your Title Loan
Title loan limits are another part of the process that the states set themselves. Some states cap title loans at $2,500, others at a different amount and some states don’t have any limits at all. Texas falls into that final category, as it doesn’t limit the amount a title loan company can lend to a borrower.
The maximum amount you can borrow will depend on two things – your car and your lender. The lender will plug your car’s details into a vehicle value guide, and then evaluate the car’s condition to determine how much it’s worth. The lender will then loan you up to a certain percentage of the car’s current market value, typically between about 30 and 50 percent.
Now that you have a better idea of how title loans work, let’s go over the requirements for a title loan in Texas.
A Government-Issued ID
This is where federal title loan laws come into play, in particular the age minimum. The federal government has set the age minimum for borrowing a title loan at 18. Even if you’re clearly old enough, lenders will almost always ask to see your ID so they can verify your date of birth and avoid lending to someone underage.
At this point, we should mention one other federal law regarding title loans – title loan companies can’t issue loans to anyone in the U.S. military.
Since a title loan is a secured loan, you must put up a piece of your property to serve as the collateral on it. In this case, the collateral is your car, and it must be a car that you own. There can’t be anyone else’s name on the title, and you can’t be making payments on it, either.
Other than that, there aren’t any guidelines regarding the vehicle you use. Whatever type of car you have, the lender will inspect it, figure out its value and issue your loan.
Your Car’s Title
This is the only item that your lender will keep during your title loan’s term. After all, they need something to hang on to so you can’t just take their money without paying them back. After you’ve repaid the loan in full, they’ll return the car title to you.
Those are the only three things you need to get a title loan, and you probably have all three with you every time you drive somewhere.
You don’t need to show the lender any of your financial documents. Banks may look through those to get a better idea of your financial situation, but title loan companies will not.
You also don’t need to provide any proof of your income, at least not in Texas. A few other states do require title loan companies to check each borrower’s income before issuing a loan and making sure that the loan payments don’t exceed a certain percentage of their gross monthly income.
It is still a good idea to have steady income if you’re going to take out a loan, since you’ll need to pay it off when the term is up. Of course, a title loan is a great way to get by while you’re waiting for a new job to start.
As you can see, the requirements for a title loan in Texas are simple and easy to fulfill. Make sure you fully understand the loan and its terms, that way you won’t be in for any surprises when it’s time to pay off your loan.