Texas Installment Loans and How They Work

Sean Collins
December 11, 2020

What is an installment loan?

The world of lending can be complicated and confusing. A seemingly endless number of terms exist, so let’s explore the concept of an “installment loan.”

Simply put, an installment loan is one that is repaid in increments as opposed to a single payment loan. It doesn’t matter whether the loan is for an item like a home or car or if the loan is secured or unsecured , as long as there is more than one payment, either of the above are considered installment loans. 

Although the term “installment loan” is broad, it is often used to explain a small-dollar loan to individuals with low credit scores and bad credit history similar to a payday loan. However, it is different because the whole loan is not due on “payday” but is due over multiple installments. Installment loans can be seen as preferable to payday loans because the loan agreement is different.  Typically, installment loans have longer repayment terms and repayments are broken into smaller loan amounts as opposed to having the whole loan due at once. These types of loans usually range from $25 - $500.

To give an example of how an installment loan works, assume someone borrows $500 and must repay $575. The loan would be considered an installment loan if that $575 owed is broken into 2 payments, 4 payments, or even 400 payments! If the $575 is due all at once, then it is not an installment loan. 

How do Texas installment loans work?

Texas installment loans can be confusing because two different businesses are involved in any given loan to one borrower. This is because of unique regulations put in place by the State of Texas. It also means a borrower may be required to sign documents for both of these businesses or the borrower may see multiple different company names on their loan agreements. One of these companies is known as the Lender and the other is the Credit Access Business (CAB). The lender actually provides the money for the loan. For doing so, they charge up to 10% interest rate on that loan. The lender is paid back the money that was borrowed plus the interest. The CAB is who arranges the loan for the borrower and takes in all of the borrower’s information. The CAB is paid a separate fee for finding the borrowers, obtaining the borrower’s information, for deciding on whether to approve the loan and the amount of the loan, and customer service once the loan is given to the borrower. 

What to expect from a physical installment loan store

Types of loans - First of all, most physical locations will offer both installment loans and short term loans like payday loans. It is possible that a physical location will offer both or just one. It is a good idea to look up a physical store and their loan products before going in. 

Hours of operation - A store will typically be open around 8 to 10AM and close around 6PM. Some stores will be open a few hours later to assist customers that work later hours. It is typical to see these stores have reduced hours on Sunday if they aren’t closed entirely. 

Requirements for all loans - To apply for an installment or payday loan in these stores, the applicant must be 18 years of age or older, be a U.S. citizen or permanent resident, and a resident of Texas. Documents needed to verify the above can vary based on the lender but a government ID should satisfy the age and resident requirements. 

Additional information that may be needed - Beyond their age and residency, what a lender would like to know about applicants also varies. Many lenders also require an understanding of an applicant’s sources and amount of income. For physical stores, this requires the applicant to bring in paystubs. Cash payments cannot be proven to a physical store. Another thing many lenders require is that the applicant has a bank account. Some stores will allow prepaid cards but many do not. Lenders often ask whether the applicant is renting or owns the place they live in. If the applicant is an owner, they will have to bring in evidence of that. This may be property taxes or other similar government documents. A renter would have to bring in documents like water, light, electricity, or gas bill or a current lease agreement. Finally, a physical store will require contact information such as phone number and email address. All of this means that a person needs to be very prepared with many different documents before going into a store. Going online to see what the store requires before showing up may save you multiple trips. 

Benefits of a physical store - All of the information above may deter you from a physical store. However, there are some benefits to going to the store in person. The ability to talk face to face with someone is a benefit that many prefer. This allows a person to ask questions and better understand what the lending agreement is. If there is an issue with the application then this in-person environment will likely resolve that issue. Additionally, some payday or installment lending stores will give the borrower cash before they leave the store as opposed to depositing into your bank account, which can take multiple business days. Lastly, although traditional brick and mortar payday lending stores have a bad reputation for scams, high interest, trapping their customers in debt cycles, and identity theft; they have been around longer and therefore have more customer reviews. Online lenders are newer and as a result may have less or no customer reviews. 

Get the money you need with a Possible installment loan.

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Online installment lender differences and benefits

An online lender is accessed by a computer or phone with a web page or accessed through an app on a person’s phone. When it comes down to it, installment loans or payday loans are similar products that serve the same customer groups regardless of having a physical or online presence. As a result, much of the required information between the two will be the same. There are some key ways that the two are different so we will explore that in more detail below. 

Hours of operation - One of the best things about an online lender is that they never close! Do you work in a kitchen and get off around midnight? Do you need to take care of the kids during normal business hours? Are there no physical stores close? No problem! The online lender has you covered. 

Information to provide - An online lender is subject to the same Texas regulations if you are a Texas resident, so they will also require a borrower be 18 or older, be a U.S. resident, and have proof that you live in Texas. This information will need to be shared virtually, which likely means a clear picture needs to be taken and uploaded. Another difference is the proof of income that gives a lender comfort that a borrower will be able to repay the loan. A paystub is not necessarily required. By connecting or showing statements of an applicant’s bank account or prepaid card, a lender can see proof of yearly or monthly income. The good news is that this information is all generally accessible to a borrower at home, on their person, or online and as a result bringing a stack of information with you to a physical store is not necessary. 

Other benefits of an online lender - The face to face communication is not something you will get with an online lender. However, that doesn’t mean customer service is gone. Many online lenders have representatives readily available. Standard business hours may apply. Further, most online lenders have documented resources, how-tos, and FAQs within their apps or web pages. Depending on the lender, borrowed money may be received in a checking account or on a prepaid card. This money may come nearly instantaneously via a banking process called interchange or it may take a few days if the lender uses ACH payments. The last, and potentially most important, benefit of an online lender is the number of options available to a borrower. Physical locations in Texas available to a borrower are limited to where the borrower lives in Texas. A more rural community will have less physical locations and even a big city will only have so many lenders in one area. Online the borrower has the option of every single online lender that operates in Texas. More options means better deals if the borrower shops around. 

Possible Finance online Texas installment loans

Possible Finance has a fantastic personal installment loan product. The application process is simple, efficient, and quick. Borrowers often start their application and receive their money all within the hour! The process is started by downloading the app, which can be done via this link. Once downloaded, the app will walk you through each step of the application. 

If approved, the loan will be a maximum of $500 for new borrowers. Our interest rates are competitive with the industry and loan term is longer than most. Repayments will be broken into 4 equal increments, which makes this an installment loan. These repayments are generally scheduled 15 days apart from one another, totaling a 60 day loan. However, a borrower can move repayment dates forward and back themselves through the app, no approvals or hassle necessary! This is one of our favorite features, because we know our customers need and appreciate flexibility. 

The article above provides many variables to consider. If you are a Texas reader and have decided an online installment loan is the right option for you, then we at Possible Finance believe we have the best loan options available with our easy application, competitive rates, and flexible repayment schedule catered to your financial needs. Whether you have short term or long term financial needs,we hope to work with you in the near future! Be well and be safe. 

Sean Collins

Sean is on the Finance & Accounting Team at Possible Finance. He focuses on accounting and audit work but will at times share his expertise in personal finance.

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