They say everything is bigger in Texas. That is no less true when it comes to the state’s burgeoning lending industry.
In fact, lending in Texas is big – and it’s getting bigger.
Here’s a breakdown of Texas lending in general, covering payday lending and auto title loans, plus a more consumer-friendly option – personal loans.
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Online Personal Loans for Residents of Texas
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Companies That Offer Personal Loans in Texas
Texas is home to a large number of personal loan lenders regulated by federal banking rules. If you need one, work on your credit a little and try applying for an unsecured personal loan.
Credit requirements vary from lender to lender with some requiring higher credit scores. Some lenders will place less of a weighting on your credit score if you can demonstrate you have the earning capacity to repay the loan.
It helps to work with a local bank in your community where you can establish a good relationship and know other members of the community. When loan decisions are made at the local level (instead of at the corporate level by invisible loan underwriters or computers), the loan decision-makers can take more into account in determining your ability to repay the loan.
Here are five community banks and credit unions that cater to local communities and offer unsecured personal loans in Texas.
Texas Trust Credit Union
Founded in 1936, Texas Trust Credit Union is a member-owned cooperative with branches serving the counties of Dallas, Henderson, Ellis, Tarrant, Johnson, and Tom Green. It has over a billion in assets and it offers a full range of banking and borrowing products, including unsecured personal loans.
A personal loan through Texas Trust can be used for just about any purpose, including debt consolidation. Loan rates start as low as 4.99 percent for borrowers with good credit. The term length for your loan can go up to 60 months.
As low as $500
Secured & Unsecured
Headquartered in Plano, Texas, LegacyTexas Bank has over $8 billion in assets. Founded in 1952, the bank has 44 branches operating throughout the state. Legacy is a full-service, FDIC-insured bank with a complete range of banking and loan products. It offers unsecured personal loans for as low as $2,000 with terms of 12 to 60 months. The APR currently starts as low as 9.49 percent for creditworthy borrowers.
Pinnacle Bank Texas
Serving families and farmers, Pinnacle Bank Texas has been a family-run bank since 1938. It has grown to more than 140 locations, managing over $9 billion in assets. Pinnacle offers a complete range of banking products and services and has a complete lineup of loan products, including personal loans in Texas. Each Pinnacle branch treats the members of its communities like family, so you can expect great personal service and attention.
Getting Help – The Texas Office of Consumer Credit Commissioner
In 1967, the state of Texas established the Office of Consumer Credit Commissioner (OCCC) to oversee licensed agencies making loans up to $2,500, including payday and auto title lenders. The OCCC is available to answer questions and assist Texas consumers who have complaints or issues regarding loan transactions. Its primary function is to assist consumers in resolving complaints and disputes they have with a lender.
The Texas OCCC answers questions and assists Texas consumers in resolving issues against regulated companies in Texas concerning pawn transactions, secondary mortgage and home equity loans, motor vehicle sales financing, and property tax loans. They also oversee businesses that offer payday and auto title loans, debt management and debt settlement providers, crafted precious metal dealers, and registered creditors. They protect consumers and assist creditors in resolving complaints and disputes. However, for consumers who want to bring legal actions, the OCCC recommends they contact the state attorney general or submit a claim to small claims court.
For consumers who want to file a complaint, the OCCC recommends they first attempt to resolve the complaint directly with the lender. If the issue cannot be resolved directly or the lender is unwilling to resolve the matter, consumers can file a written complaint with the OCCC. If the OCCC has jurisdiction over the lender, it will attempt to contact the responsible authority. If it does not have jurisdiction, it will refer you to the appropriate agency.
Consumers can start the process of filing a complaint on the OCCC website, but it will almost always require additional documentation to support your complaint.
Alternatives to Avoid
Payday Lenders Are More Popular Than McDonald’s
For some perspective on how big and popular payday lending is in Texas, consider the fact that there are twice the number of payday loan shops as there are McDonald’s restaurants. There are just over eight payday loan shops for every 100,000 residents versus four McDonald’s restaurants. In 2015, on one five-mile stretch of highway in Texas there were 55 payday loan shops, the Fort Worth Star-Telegram reported.
While that per capita number pales in comparison to some states, such as South Dakota (40 per 100,000), New Mexico (42 per 100,000), and Mississippi (about 39 per 100,000), it’s important to note that Texas is one of the fastest-growing states in terms of population, according to the U.S. Census Bureau.
The number of payday lenders is likely to continue to grow. In Texas, which is the second-most populous state with 28.3 million residents, 8 percent of the population has used payday loans compared with the national average of 5.5 percent. That’s more than 2 million customers. As the seventh-fastest growing state, Texas added nearly 400,000 people in 2016, which represents 32,000 potential new customers to be served by payday lenders.
Texas-Sized Loan Fees
What’s really big in Texas is the amount of fees paid to payday lenders. Texas does not cap the fees charged by payday lenders. In 2016, Texas payday lenders drained more than $1.2 billion in fees and interest from the pocketbooks of borrowers, according to the Center for Responsible Lending. That’s more than double the amount of fees generated by California payday lenders, even though they outnumber Texas payday lenders by almost 800. Texas payday lenders account for nearly 30 percent of the total fees collected by all payday lenders in the U.S.
The average amount of a payday loan in Texas is $470, according to the Center for Public Policy Priorities. The average origination fee on $100 borrowed is $22.85, equaling $107 on the average amount borrowed. With additional third-party interest charges, the total repayment amount due on the borrower’s next payday is about $650. The effective annual percentage rate on the average payday loan in Texas is 439 percent.
The same loan amount in Nebraska would cost $75 in fees, and a Florida borrower would pay $55 in fees. While many cities in Texas have established ordinances limiting the number of refinances to three or four, in most cities there is no limit. This goes to the heart of the debt trap that most payday loan borrowers find themselves in.
Texas Also Leads in Auto Title Loans
Texas is also big on auto title loans, which can create an even bigger burden for borrowers. An auto title loan is where borrowers must put their vehicle up for collateral – essentially turning their title and a spare key over to the lender until the loan is repaid.
The average auto title loan size in Texas is $1,003 on single-payment loans, which charge an average $22.58 per $100 borrowed, and $1,118 on installment payment loans, which charge an average $91.79 per $100 borrowed.
It gets worse for borrowers if they can’t make their auto title loan payments. Texas law allows lenders to repossess vehicles if the borrower is late just one week on a payment. The repossession company may go onto private property without a court order or advance notice.
Still, auto title lenders would prefer not to repossess vehicles because it can be very expensive. They have to pay the cost of towing the vehicle and they must have the car rekeyed so they can sell it at auction. If the car is sold for more than the loan amount, the lender may keep the surplus and, if it sells for less than the loan amount, the borrower is responsible for the deficiency, including the costs incurred by the lender to repossess and rekey the vehicle.
The real tragedy for auto title loans is that, on average, borrowers refinance their loans eight times, which can more than triple the fees and interest due on a loan repaid over eight months, according to the Center for Responsible Lending.
Texas is Largely an Unregulated Marketplace
Texas is one of a shrinking majority of states that does not place restrictions on payday lending. There are no limits on fees, interest rates, loan amount size, number of refinances, or ability to pay based on income. As a virtually unregulated marketplace, Texas is the Wild West for payday and auto title lenders. The Texas Constitution does cap the interest rate lenders can charge at 10 percent. However, payday and auto title lenders are able to get around the law because they operate as credit access businesses (CABs), which are allowed to charge fees for brokering loans between borrowers and third-party lenders.
Although it has tried on a few occasions to enact laws to rein in the nearly $6 billion payday and auto title industry, the Texas legislature has come up short each time. However, an increasing number of towns and cities are establishing local ordinances.
The local ordinances, which cover about 10 million Texans, cap the loan size at 20 percent of a borrower’s monthly income and, for auto title loans, 70 percent of the retail value of a car. They also require lenders to verify a borrower’s income and limit the number of refinances. About two-thirds of the state’s population is not covered by these types of ordinances.
The Texas legislature did enact a law that requires payday and auto title lenders that operate as CABs to be licensed and regulated in the state of Texas. This means consumers can at least check with the state to see if the lender is licensed as required.
Another law requires lenders to provide more noticeable disclosures regarding the true cost of the loans. This prevents lenders from posting cryptic fee calculations and APRs that have little to do with the total cost of the loan. Lenders also have to fully inform consumers how quickly the loan costs can skyrocket if they don’t pay the loan off quickly. They must also inform the borrower of how their loan costs compare with alternative loan sources.
One important area in which title loan laws in Texas place limits on borrowers is term limits. Borrowers do face loan term limits in Texas: credit service contracts may not exceed 180 days. This means a 30-day original title loan can be renewed a maximum of five times before no more renewals are allowed and the loan is due in full.
How to Know if a Lender is Legit
All non-depository lenders who charge more than 10 percent interest must be licensed with the OCCC. That means practically every payday loan shop must be licensed with the OCCC to operate in the state of Texas. Based on that criteria, the lender is said to be legitimate.
But remember, except in some localities, the lender may not be restricted to any loan rate or amount caps. You would be dealing with a “legitimate” lender that can legally gouge you with a 400 percent APR.
You can check with the OCCC to see if the lender has any unresolved complaints. You should also check with the Better Business Bureau to see how it rates and the number of complaints it has. You should also check with the state attorney general to see if there have been any legal actions.
Author: Jeff Gitlen
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