What You Need to Know
In Texas, you can get a title loan for whatever amount you and your lender agree to. But depending on how your lender is registered in the state, your lender may be restricted to charging up to 10% interest, or as much as you’re willing to pay. Regardless of the interest rate, your lender must disclose how much you are expected to pay in interest before you accept the loan. Lenders may also charge additional fees. Similarly, there are no limits on fees but the amount of the fees must also be disclosed.
In addition to fees and interest your lender should also disclose to you the name, address, and phone number of the Office of Consumer Credit Commissioner’s consumer helpline. There should also be a notice stating that: “An advance of money obtained through a title loan is not intended to meet long-term financial needs. An auto title loan should only be used to meet immediate short-term cash needs. Refinancing the loan rather than paying the debt in full when due will require the payment of additional charges.”
In order to make it clear the risks associated with title loans, the state of Texas requires lenders to give you all the information regarding your loan upfront. That includes accumulated fees and interest during the normal length of the loan and those associated with the loan if it is renewed or refinanced. Texas law also requires lenders to disclose the interest, fees, and APR they’d charge on a title loan by comparing it to the interest, fees, and APR that’d be charged on other forms of debt. By giving you the comparison you, the borrower, should be able to make a more informed decision.
How You’re Protected from Repossession
If you’re late on your loan your vehicle automatically becomes at risk of being repossessed. Your lender doesn’t have to get a court order, or give you advance notice before repossessing your vehicle. That doesn’t mean that they won’t, because lenders may, on a case by case basis, prefer to offer a payment plan or more time to fulfill your loan than to take on the expense of a repossession and sale. Not only will a lender have to pay for a repossession agent to repossess the car but he/she will also face storage fees, the cost of rekeying a vehicle if a copy is not provided, and other costs associated with selling that vehicle.
If your lender does move to have your car repossessed he/she will have to employ a licensed repossession agent who will have to follow the repossession laws of Texas and the regulations of their professions. This means, among other things, they can’t repossess a vehicle through destruction of property, violence, or by disturbing the peace in any other way.
Once your car has been repossessed your lender will try to sell it to repay your debt. Once a sale date has been set, you should be given at least 10 days’ notice. Your lender should tell you the time, date, and location of sale. In addition, the new balance you’ll have to pay to redeem your car and avoid it being sold. Here, new balance will include the additional costs of repossessing the car and preparing it for sale.
Further Obligations & Fees
The proceeds of the sale will be applied to your debt, but it is not guaranteed that the proceeds will cover all that you owe. Especially since what you owe will include the additional costs of repossession, storage, et cetera. In the event you still owe your lender even after your car has been repossessed and sold, you will still be liable for whatever you owe. If your lender chooses to sue you to recover the balance you may also have to pay attorney’s fees and court costs. For example if you owed $4500 at the time of default, and then costs related to repossession totaling $900 were added, and your vehicle eventually sells for $3800, you will still be liable for the remaining $1600 (4500+900-3800).
The laws and regulations set out here apply to Texas as a whole. Individual cities, towns, or municipalities may pass additional and sometimes more restrictive regulations related to title loans. To fully understand your rights and obligations you should be sure to research laws specific to your region within the state.
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