Payday Loans in Texas: How to Avoid Predatory Loans in the Lone Star State

Inside Subprime: Nov 29, 2018

By Lindsay Frankel

Though poverty rates have been declining in Texas, 14.7 percent of Texans still live in poverty, and four percent are unemployed. Texans who are struggling to pay their bills need access to credit, and those turned down by traditional banks may consider payday loans. These short-term, small-dollar loans provide quick cash to people with bad credit, but these pricey loans are one of the riskiest options for borrowing money. Payday loans in Texas carry an average annual interest rate of 454 percent, and the state does little to protect borrowers from ending up buried in debt.

What laws protect consumers from payday loans in Texas?

Beyond collecting data and requiring licensing and legal disclosures, Texas does nothing to regulate payday loans. Payday loan and title loan providers in Texas have found their way around usury protections by registering as Credit Access Businesses, which are unregulated. While some cities in Texas have ordinances that limit payday lending, the state does not cap interest rates, and lenders can charge whatever they wish. Payday loan firms run rampant in Texas; there are more than twice as many payday lending storefronts as there are McDonald’s restaurants.

What other resources are available in Texas?

Payday loans are often advertised as emergency solutions, but most people use them to cover basic living expenses. An unexpected setback can make it even more difficult to make ends meet, which is why planning ahead with a savings account is one of the best ways to avoid a payday loan.

Healthcare emergencies can be some of the most costly, so if you don’t currently have health insurance, check to see if you are eligible for financial assistance from Texas Medicaid. There are also plenty of free and sliding-scale health clinics located across the state, which you can visit if you need care right away.

You can also get assistance finding affordable housing, get help with your utility bills, or obtain rent assistance if you are eligible. If you are struggling to put food on the table, check to see if you qualify for the state’s Supplemental Nutrition Assistance Program (SNAP), which helps low-income families cover the cost of food.

What are some alternatives to payday loans in Texas?

If you can’t reach out to family and friends for help, your employer may be able to offer a one-time advance in the case of an emergency. It’s also worth talking to banks or credit unions to see if you can secure a lower-cost loan. If a no credit check loan is your only option, consider an installment loan that will help you to build your credit. These loans have lower interest rates and are supported by great customer service, so you can avoid the exorbitant fees and abusive collection practices associated with payday lenders.

Once you get back on your feet, you’ll want to secure additional income and set up a savings plan to avoid future gaps in income. Setting aside money for your future will help you avoid debt, so you can put your money to good use instead of spending it on payday loan fees.

For more information, check out our guide to payday loans in Texas.

For more information on payday loans, scams, and cash advances and title loans, check out all of our Financial Resource Guides, including Texas including ArlingtonAustinDallasEl PasoFort WorthHoustonIrvingKilleenMcAllenPlanoRound RockSan AntonioTyler, and Waco.