A title loan is one in which you give a lender a lien on your vehicle in exchange for funds. In Texas, title loans must comply with state loan and title laws. You should always consult with a Texas lawyer if you need legal advice about the state's laws about title loans.
Title Loans
A title loan can seem like a good idea, but these loans can often be disastrous. When you take out a car loan, you agree to give the lender a legal interest in your car, known as a security interest, in exchange for a set amount of money. You agree to repay this money, with interest, at the end of a certain amount of time, typically 30 days. If you fail to repay the loan at that time, the lender legally owns your car and can take it from you.
Titles
To get a title loan, you have to own your car. This means that if you bought your car with a loan, you must have paid off the car loan and have a clear title. Texas requires that in order for anyone to legally own a car, the car title must be in that person's name. If you want to sell your car that has a lien on the title, you must first pay off the loan and get the lien released by the lien holder. Once this happens, you can get a new title from the Texas Department of Motor Vehicles.
Title Lending
While many states have outlawed car title loans, and other states have laws that specifically allow for these loans, Texas is one of a handful of states that allows for title loans because state law neither specifically outlaws or allows for them, according to the Center For Responsible Lending. A credit services organization in Texas can offer title loans but must register with the Texas Secretary of State's Office.
Repossession
Title loan companies often seek to take advantage of people in financial distress by offering the availability of quick cash in exchange for a security interest on the car. However, when you give the lender a security interest in the car, the lender has the right to take possession of the car when you fail to repay the loan. Because the lender has the security interest, it can take possession as soon as you default on the loan and does not need your permission to do so.
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