How Do Title Loans Work in Texas?


March 28, 2023



min read

How Title Loans Work in Texas

Title loans are a type of secured loan where the borrower uses their vehicle as collateral. In Texas, title loans are regulated under the Credit Services Organization (CSO) Act and the Texas Finance Code.

Here's how title loans work in Texas:

Eligibility: To get a title loan in Texas, the borrower must be at least 18 years old and own a vehicle with a clear title, which means the vehicle is completely paid off and there are no liens or loans against it.

Application: The borrower applies for a title loan with a lender, providing information about themselves and their vehicle, including the make, model, year, and mileage.

Vehicle inspection: The lender inspects the vehicle to determine its value and condition, which will be used to determine the loan amount.

Loan agreement: If the borrower is approved for the loan, they will be given a loan agreement that outlines the terms of the loan, including the loan amount, interest rate, repayment period, and any fees.

Title transfer: The borrower must transfer the title of the vehicle to the lender as collateral for the loan. However, the borrower retains possession of the vehicle and can continue to use it during the repayment period.

Repayment: The borrower must repay the loan according to the terms of the loan agreement, which typically requires regular payments over a period of months. If the borrower fails to repay the loan on time, the lender may repossess the vehicle and sell it to recover the loan amount.

It's important to note that Texas law limits the amount of a title loan to the lesser of 70% of the vehicle's value or 3% of the borrower's gross annual income. In addition, the interest rate on title loans in Texas is capped at 10% per month, which can add up quickly over the repayment period. Therefore, borrowers should carefully consider the risks and costs associated with title loans before applying for one.

So, if you're in a situation where you're in Texas and considering a title loan, we think a better option is applying for the Yendo secured credit card. It's is a real credit, powered by Mastercard, that uses the value of your car to determine your credit line, does not require either a deposit or a credit score, and can provide you with up to $10k in revolving credit. It works just as a credit card can in that with responsible usage, on-time payments for example, you can build your credit score.