How do title loans work in Texas?

Quick Answer Title loans in Texas work the same as they do in every other state with the exception of a few extra safeguards. In Texas, there are unique laws that limit the amount of interest and fees a title loan lender can charge, and require lenders to be properly licensed to offer title loans.

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Jack Woerner Answer updated on Jun 26, 2023

Fact checked by Dwayne Dumesle

Title loans work almost the same in Texas as they do in most states.

In almost all states, title loans work by using your vehicle's title as collateral to borrow money. Title lenders will then assess the value of your vehicle and determine the loan amount you qualify for. Once you receive the loan, the lender will hold onto the title while you make payments.

Learn: How do title loans work?

However, there are some exceptions and key differences to take note of when applying for title loans in Texas. 🤠

The Texas Finance Code, which regulates title loans in Texas, limits the amount of interest a title loan lender can charge. The code also requires lenders to have proper business licensing.

As of 2023, the interest rate cap for title loans in Texas is set at 10% APR.[1] Therefore, no lender can charge interest that exceeds 10% of the loan amount on any title loan in all of Texas. However, Credit Access Businesses (CABs) are not subject to the rate cap.

Furthermore, Texas-based title lenders can charge certain fees like:

  • Repossession fees
  • Overdue fees
  • Late payment fees
  • Doc preperation fees
  • Processing fees

Lastly, in order for lending companies to operate in Texas, they must have a legitimate business license. They also need to be properly registered with the Texas Department of State and be licensed by the Texas Department of Banking.

Whether you are applying for a title loan in Texas or another state, I advise that you take some steps to better protect yourself before applying for a title loan.

Learn: Where can I get a title loan?

Be patient! Compare loans from various lenders, read and understand the loan terms, organize all your loan documents before seeking out a loan, and make sure you can pay off the loan in full and on time!

  1. Texas Finance Code § 393.001 et seq. ↩︎

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