Installment Loans: Avoiding Texas Payday Loans
Do you need a loan in Texas? Hey, it happens to the best of us. There are a few things you should know about the types of loans available to you, credit and repayment terms, and where you can get those loans. The differences can be huge. This is a guide to borrowing money to handle short-term financial needs. The more you know, the better you will be able to be to find a short-term loan that meets requirements. That’s good, right?
Types of Loans
Lenders classify loans by different purposes for the money and by the item (or collateral) that backs the loan, if any. The two broad categories are secured loans and unsecured loans.
A secured loan is backed by an asset that, in theory, the lender can take if you don’t pay back the loan.
- Mortgages: This is the type of secured loan that most people understand. A mortgage is a loan made against real estate. Almost all mortgages are made to buy a house, known to bankers as purchase money mortgages. The loan is generally set up as an amortizing loan that will be paid off in 15 or 50 years, and it can usually be paid off early if you like, especially if you decided to sell the house. Mortgages are usually issued by banks and credit unions. A hard money loan is a mortgage that is used for personal spending needs. It is usually made by a finance company, not by a bank.
- Home Equity Loans: A home equity loan is a type of mortgage taken out by a homeowner against the value of the house that is not part of another mortgage. Many home equity loans are used for home improvement projects. Others, especially those structured as home equity lines of credit, may be used for personal spending needs.
- Property Tax Lenders: If you can’t pay your property taxes, a property tax lender will loan you the money in exchange for a claim on your house or other real estate. These can be expensive, and in many locations, the local tax authority may offer a better payment plan. Interest rates on these loans may be lower than with other types of personal loans, but if you can’t pay the loan back, you may lose your house.
- Auto Loans: As the name implies, an auto loan is used to buy an automobile. It is a loan made against the value of a car to purchase it. When the loan is paid off, you own the car. An auto lease is similar, but you are only paying for the use of the car. When the term of the lease is up, you have to return the car to the dealer. If you miss payments, you will lose the car
- Title Loans: Title loans are second loans made against the value of your car. The title lender may keep your title, or it may return the title to you after recording a claim against it. The lender will probably request a set of keys, too. If you default on the loan, your car will be repossessed, whether or not you have the title, often through the use of a remote shut-down device. (Lenders can be like that.) The interest rates on these loans can be high, often over 200%.
- Pawn Shops: Pawn shops are popular with people in tight financial situations for two reasons. The first reason is that pawn shops offer loans. With a pawn shop loan, you take an item of value such as jewelry or a musical instrument to the lender. The lender then writes you a 30-day loan. At the end of the month, you can repay the loan with interest and fees and receive your item. In Texas, interest rates for pawn loans are set by the state annually and are based in part on the value of the item. If you can’t repay, the lender will sell your item. That’s the second reason people like pawn shops — they can be great places to get small appliances or other items that you may need at a low cost.
As the name implies, an unsecured personal loan is not backed by a hard asset like a car or a house. Instead, the lender looks at whether or not you are able to pay back the loan. The requirements can be high because there is nothing for the lender to take if you don’t pay up. They aren’t impossible, though. If you work full time (40 hours per week), take home $1,500 or more per month, have direct deposit set up to your bank account, and are over the age of 18, then you are eligible for an unsecured loan in Texas.
- Installment Loans: Also known as signature loans, personal installment loan is an unsecured amortizing loan. These are usually for amounts between $750 and $5000. Each payment will be both principal and interest, so the value of the loan will be zero at the end of the term and the total amount of interest paid is lower.
- Credit Card: Although most people don’t think of it this way, a credit card allows you to take out a loan whenever you use it to buy something. The maximum amount depends on the limit set by the credit card company. If you pay off the balance before the due date, you probably won’t earn interest. Merchants who accept credit cards pay a commission on each transaction, so credit card companies don’t need to charge interest to make money. But they do charge interest! APRs can be as high as 35%, and many credit card companies also charge annual fees. Credit cards can be a good idea for people who can make regular payments, but they are rarely useful in a tight financial situation.
- Cash Advance: A cash advance is a cash loan taken out through your credit card. The amount that you can take depends on the cash advance limit set by the credit card company. These are not cheap, as anyone who has accidentally put their credit card into a cash machine instead of a debit card can tell you. The interest rate is often higher than it would be on a purchase transaction, interest may be charged from the day the cash advance is taken, and there may be a transaction fee, too. If you still want a cash advance, use an ATM machine or visit a bank branch.
- Line of Credit: A line of credit is an arrangement with a bank that gives you the right to borrow money. Once a bank approves the line, the loan can be obtained by writing an overdraft check, using a debit card, or visiting the bank branch. Many checking accounts have overdraft protection, which is nothing more than a small line of credit. Other than overdraft protection, unsecured lines of credit are mostly available to people with high credit ratings. Interest rates vary, and there may be a fee charged each time it is accessed.
Payday loans are a way to get money fast. They are also a good way to damage your finances. These are unsecured loans. The laws and practices vary from state to state, but most payday lenders charge high fees that almost always make a payday loan the most expensive way to borrow money, bar none. If you want to go there, though, you should know a few things:
- Payday Loan — Single Payment: Payday loans are same-day cash loans that are usually structured as a post-dated check. The borrower writes a check for the amount of the finance loan plus a fee, and the lender agrees to hold the check for a certain amount of time, usually the borrower’s next payday. If the loan can’t be repaid, the borrower can renew it to extend the time period. The interest and fees can be very high; in Texas, lenders are allowed to charge 700% APR. Getting a payday loan is easy; paying it back is hard. The high payment means that many people can’t pay them back, extending the borrowing cycle and the total cost. These may be the only option available for people with very low credit ratings or temporary jobs.
- Payday Loan — Multiple Payment: Texas law allows for payday installment loans that can be paid off over six months. Although borrowers can pay them off over a longer period of time than with a regular payday loan, the interest and fees remain high. The annual interest rate on these can be as high as 700% percent in Texas.
Credit and Repayment
A personal loan can be used to cover a large bill or an emergency expenditure. The amount borrowed in a private loan usually ranges from $1,000 to $10,000. The size of the payment will depend on the interest rate charged. The interest rate, in turn, is based on how the loan is structured and the credit rating of the borrower. No matter what type of loan you get, you’ll want to understand the role of credit and the way the loan is repaid.
Your credit rating is really important, especially if you need money. The different credit ratings agencies in the United States (Experian, Equifax, and TransUnion) evaluate borrowers based on their willingness and ability to repay loans. They look at your past experience with loans, the amount of your income, and how long you have lived in one place, among other factors. You can get more information about credit reports at USA.gov.
The interest rate is the price of money. It is determined in part by the overall economy, but it is mostly based on how likely the borrower is to repay the loan. Interest rates are usually quoted as annual percentage rates. Borrowers fall into four general categories, based on their credit ratings:
- Prime: Prime borrowers are the very best customers. Have you ever heard the term prime rate in the financial news? That’s the rate that banks charge the largest and most profitable companies for their loans. Individuals with very high credit ratings pay a rate close to the prime rate. These are generally people who don’t need loans, either — isn’t that clever on the part of the banks?
- Near Prime: A near-prime borrower has credit that is almost but not quite prime. This might be because the borrower does not have a lot of experience with paying off loans or has a lower income. These borrowers will pay a rate slightly higher than a prime borrower, up to about 35% a year.
- Subprime: Subprime borrowers are those with a lot of debt, a low income, or a history of financial problems. They pay a higher interest rate to reflect the higher risk to the lender, and it may be as high as 200% as an annual percentage rate.
- High Risk: A high-risk borrower pays a very high rate of interest. This is a borrower who has a history of defaulting on loans and erratic employment. Interest rates on loans to these borrowers range from 200% to 400%, the maximum rate that may be charged in Texas.
The payment on a personal loan can be structured different ways. The difference is important to consider because it will affect your budget.
An installment loan, also known as an amortizing loan, is set up so that each payment is the same amount of money. And, each payment made by the borrower includes both principal and interest. The loan is completely paid off at the end of the term. Most car loans and mortgages are set up this way. Credit cards are a form of installment loan, but it can take years to pay them off if you make only the minimum payment.
Under an interest-only loan, you have to pay back the interest charged for each month but not the principal. Some lines of credit are set up this way. They may even allow you to borrow more principal as long as the interest is paid. Some interest-only loans are set up as balloon loans. This means that the entire amount borrowed is due when the loan matures. This requires great discipline from the borrower and so is usually offered only to prime borrowers.
By the way, even if the bank fails, you’ll have to pay the loan back. A loan is an asset to a lender because it is a contract that generates money for it. The way out of a loan is to make the payments. It may not be fun, but it is absolutely doable.
Where to Get Loans
There are many ways to get a loan in Texas and elsewhere. There are differences; some are more convenient, some have lower rates, and some only deal with existing customers. The alternatives are:
- Online: Online installment loans allow you to borrow money based on your bank accounts and pay check. With these, the money is transferred to your checking account, and your payments can be deducted automatically, too. Obviously, you want to deal with an online lender that meets regulatory requirements and has an encrypted website (look for “https:” in your browser’s address bar). These loans are convenient — no trips to make, no meetings to attend.
- Banks: Some banks offer installment loans and sometimes even online loans, on a short term basis. They generally look for high credit ratings and existing customer relationships, and they rarely offer same-day cash loans. Those who meet their high requirements usually enjoy lower interest rates on a bank loan than a loan from an alternative lender. The trick is that you have to have an existing relationship with the bank.
- Credit Unions: Credit unions also offer personal loans. In fact, many credit unions offer payday alternative loans as a short-term loan with much lower interest rates than a traditional payday loan. Many offer loans similar to payday installment loans and other types of installment loans. Generally, these loans are only available to current credit union customers, and they often have high credit requirements. Credit unions usually require customers, also known as members, to work for a specific employer or to live in a specific area. If you do qualify to join, you’ll usually find lower rates and fees than with a traditional bank. You’ll also find fewer ATM locations — ouch!
- Storefront Lenders: Some mortgage, title loan, and personal loan lenders operate out of neighborhood locations. They offer many of the same loans as banks and online direct lenders, but with the hassle of having to make a visit. Sometimes, the higher overhead of having to maintain an office means that they charge higher interest rates.
- Peer-to-Peer Lenders: Peer-to-peer lenders are online loan companies that pool money from investors (often individuals) to lend out to borrowers. Potential borrowers apply, then receive information about the types of loans that they are eligible for. This will depend on the borrower’s credit rating and the types of loans that the investors are interested in making. It may take a week or more for a loan to be identified, approved, and funded; these are not same-day lenders.
Which Loan Works For You?
When taking out a short-term personal loan, there are several different considerations. When you shop for a loan, you should look at rates, fees, and other features and costs of the loan. Some of the terms you may see and factors involved are:
- Annual Percentage Rate (APR): The APR is the interest rate you would pay on the total amount borrowed if you had that amount outstanding for a year. It is the cost of money, and it is affected by the overall economy, the inflation rate, and the amount of risk that a loan has. A secured loan such as a mortgage has a low APR because the loan is backed by the house. Unsecured loans will have much higher APRs, even to borrowers with good credit.
- Fees: Many loans have application fees. Some, such as credit cards and lines of credit, may have annual fees, too. Secured loans may have fees for a title search or require the borrower to maintain insurance. Your auto lender expects to be repaid, even if your car is totaled.
- Repayment Process: Will your payment be taken directly from your checking account? Will you have to remember to send in a check? Will you have to walk down to the currency exchange? The repayment has to fit into your life. Another consideration is how often the payment is made. More frequent payments mean you will pay less interest over the life of the loan.
- Financial Education: Some lenders offer educational programs to help you improve your financial future. In some cases, you can earn discounts on the APR or fees for completing educational programs. And, the more you know, the less likely you are to face a financial emergency.
- Credit Reporting: Some lenders will report information about your loan to the credit rating agencies, others will not. Reporting the loan to the credit agency is great for a borrower who repays the loan and who is looking to build better credit to meet future financial plans.
- Direct Loans: A loan may be made by the lender, or a broker or referral agency may be involved in making the recommendation or processing the paperwork. If a third party is involved, the interest rates are usually higher than with a direct lender. There may be fees involved to make sure everyone involved receives their cut. The extra people make it hard to get money fast.
Note About Regulations
Sure, you could borrow money from your neighborhood loan shark, but who knows what you’ll be getting into? In order to keep lenders on the up and up and protect borrowers, the Texas Office of the Consumer Credit Commissioner regulates Texas cash loans.
Under Texas law, businesses that arrange for credit access — those that provide payday loans, title loans, and signature loans — are allowed to charge any interest rate that they want for the service of making the loan. Seriously. As a result, loans sometimes have interest rates of 700%.
OppLoans offers personal cash loans in Texas. Customers rate us 4.9 out of 5 stars for our fast loans with monthly payments. We are a direct lender with larger loans and affordable payments over time. Our great rates save you money on personal installment loans. Apply online and get approved for our fast loans in minutes. Get funds as soon as tomorrow and receive credit education discounts. Get a loan today with OppLoans.
Credit Access Business
Opportunity Financial will not be the lender for loans received at this site. Opportunity Financial is a Credit Access Business. We will attempt to arrange a loan between you and a third party lender and service that loan once it is issued. Any questions, service issues or complaints about your loan will be addressed by Opportunity Financial and not the lender.
First time borrowers are eligible for between $1,000-$10,000.
Your loan will paid back in equal, fully amortizing and reoccurring payments over a term period of up to 179 days.
You have the right to rescind your loan within 3 days of signing your loan contracts. To access the cancellation forms, Click Here.
You have the right to repay your loan in full at any time with no pre-payment penalty. Your loan is structured to be paid back in equal fully amortizing installment payments over a term period of up to 179 days.
Fee Schedule and APR
Your Credit Access Business fee will be 199% APR. You will also be charged interest by your lender of 10.00% APR on loan principal and CAB fees. Click here to find fee schedules for three common loan amounts offered to our customers.
Consumer Disclosure Form
This link leads to disclosures, required by the state of Texas for all residents applying for a CAB loan or an extension, which outline the total costs associated with these types of loans of different amounts.
Consumer Credit Notice
This business is licensed and examined by the State of Texas – Office of Consumer Credit Commissioner. Call the Consumer Credit Hotline or write for credit information or assistance with credit problems. Office of Consumer Credit Commissioner, 2601 North Lamar Boulevard, Austin, Texas 78705-4207, 800-538-1579, firstname.lastname@example.org, www.occc.state.tx.us.
An advance of money obtained through a payday loan or auto title loan is not intended to meet long-term financial needs. A payday loan or auto title loan should only be used to meet immediate short-term cash needs. Refinancing the loan rather than paying the debt in full when due will require the payment of additional charges.
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