Personal loans are of course subject to many federal regulations, but individual states also issue specific laws to protect consumers. The same holds true for Texas, where loans are regulated either by the Office of Consumer Credit Commissioner (OCCC) or the Department of Banking. Before choosing your next personal loan, it is important to familiarize yourself with Texas-specific guidelines so that you can make an informed decision about the best type of loan for your financial situation.
A personal loan is when a consumer borrows money from a lender with the promise to repay the loan and accrued interest within a certain timeframe. The most common types of personal loans include:
- General personal loans
- Car loans
- Student loans
- Payday loans
The type of loan you select depends on a variety of factors, like your credit history, how fast you need the money, and how much money you would like to borrow. General personal loans are available through traditional financial institutions and generally come with the lowest interest rates and the longest repayment periods. However, they also typically require fairly strong credit. Car loans can be taken out either through a traditional lender like a bank, or financed directly through a dealership. Student loans are offered through both the U.S. Department of Education and private lenders. For borrowers with limited credit who need a small amount of cash quickly, payday loans can be a good resource.
Laws and Regulations
While most lenders are regulated by state agencies, local municipalities may also implement additional regulations. The Texas Municipal League, for example, provides consumers with regular updates of changes in local law affecting auto title and payday lenders.
Other Texas-specific laws include rate caps for different types of loans. Motor vehicle loans, for examples, must have an effective annual interest of no more than 27%. Pawn shop loans, on the other hand, can go all the way up to 240% annually. Payday loans do not have a rate cap, though the amount you can borrow is limited to $1800.