Texas · State Guide
Personal Loans in Texas: How Chapter 342 and the $18-per-$100 Rule Shape Your Rate
Texas regulates consumer installment loans under Finance Code Chapter 342, which uses an add-on interest formula with CPI-adjusted bracket amounts, not a single APR cap. Here’s what the current rules actually mean for your rate, what to verify before signing, and how to avoid the CAB/CSO trap that’s unique to Texas.
APR range (network)
6.99%–35.99%
Loan amounts
$1K–$50K
Default usury rate
10% / year
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How Texas Regulates Personal Loans
Texas begins with one of the strictest default usury ceilings in the country: Article XVI, Section 11 of the Texas Constitution caps interest at 10% per year in the absence of specific legislation (Texas Finance Code § 342.004 restates this baseline). Almost every consumer installment loan in Texas therefore operates under a statutory exception, most commonly Chapter 342 of the Finance Code, administered by the Office of Consumer Credit Commissioner (OCCC).
Chapter 342 does not impose a single APR cap. Instead, it uses an add-on interest formula based on bracket amounts. Under § 342.201, a licensed lender on a non-real-property loan may charge up to $18 per $100 per year on the portion of the cash advance up to the lower bracket (reference base amount of $300), and up to $8 per $100 per year on the portion between that lower bracket and the higher bracket (reference base amount of $2,500). These bracket amounts are adjusted annually for the Consumer Price Index, with the OCCC publishing updated brackets — typically in the first quarter each year.
Alternatively, under § 342.201(e), a Chapter 342 loan may use a scheduled or true-daily-earnings rate not exceeding 30% per year on the portion of principal up to the $500 reference base, stepping down in tiers for larger portions of the loan.
Texas Finance Code § 342.201 - Simplified Structure
Framework
Maximum Allowed
Applied To
Constitutional default
10% per year
All loans absent a statutory exception
Add-on interest (§342.201(a))
$18 per $100 per year
Portion up to lower bracket (base $300, CPI-adjusted)
Add-on interest (§342.201(a))
$8 per $100 per year
Portion between lower and upper bracket (base $2,500, CPI-adjusted)
Alternate rate (§342.201(e))
30% / 24% / 18% tiers
True daily earnings method, tiered by principal portion
For current CPI-adjusted bracket amounts and rate ceilings, consult the OCCC’s Interest Rates page and the weekly Texas Credit Letter. The network partners we work with cap APRs at 35.99%.
Why this matters for borrowers
Because Texas allows higher charges on smaller portions of principal, small-dollar Chapter 342 loans ($300–$2,500) tend to carry substantially higher effective APRs than larger installment loans, that’s baked into the statute, not lender preference. If you’re borderline between a $2,400 and a $3,500 loan, asking about both tiers can measurably change what you pay.
Texas Market: What Borrowers Actually Pay
Rate ceilings tell you the legal maximum; what matters in practice is where offers actually cluster. For a borrower with prime credit applying today, the realistic reference point is national data, the Federal Reserve’s G.19 reports an average 24-month personal loan APR of roughly 12% at commercial banks, though the blended industry average across all credit tiers and lender types runs higher. Texas borrower context:
$79,720
Texas median household income (2024 ACS 1-Year)
Source: U.S. Census Bureau, 2024 American Community Survey
695
Average credit score in Texas, below the U.S. average of 713
Source: Experian / Self Financial analysis
~30%
Share of Texans with credit scores below 620 (subprime)
Source: Dallas Fed Consumer Credit Trends, Equifax data
16.7%
Texas uninsured rate, the highest in the nation
Source: U.S. Census Bureau, 2024 ACS Health Insurance Coverage
Texas has the highest uninsured rate in the country, with 21.6% of working-age adults lacking health coverage. That correlates directly with a higher share of personal loan applications in Texas being medical-expense-driven compared to national averages. It’s also why lenders in the Texas market price medical-purpose loans at a wide range of APRs depending on credit profile.
The CAB/CSO Structure — A Texas-Specific Trap
Texas allows a unique lending arrangement: a Credit Access Business (CAB) or Credit Services Organization (CSO) doesn’t lend money directly. Instead, it arranges a loan from a third-party lender and charges a separate fee for “arranging” it. The stated interest rate on the underlying loan can look reasonable (often at or near the 10% constitutional ceiling) while the CAB fee pushes the all-in cost dramatically higher. This structure is most common in payday and auto title lending but sometimes appears in installment products.
What to verify before signing
Always ask the lender for the all-in APR including every fee, not just the nominal interest rate. Under federal Regulation Z (Truth in Lending), the APR disclosure must include most finance charges, but the way CAB fees are presented can vary. If the quoted rate seems far below market and you see separate arrangement or brokerage charges, you’re likely looking at a CAB arrangement.
Consumer Protections Specific to Texas
OCCC licensing verification
Any lender making Chapter 342 loans at rates above the 10% constitutional ceiling must be licensed by the OCCC. You can verify licensing in under five minutes through the Office of Consumer Credit Commissioner. As of January 1, 2026, Texas migrated OCCC licensing to the Nationwide Multistate Licensing System (NMLS), aligning with national standards. This is the single most useful pre-signing check a Texas borrower can do.
Military Lending Act
Active-duty servicemembers and dependents at Texas installations, Fort Cavazos, Joint Base San Antonio (Lackland, Randolph, Fort Sam Houston), NAS Corpus Christi, Dyess AFB, Sheppard AFB, and others, are covered by the federal Military Lending Act (10 U.S.C. § 987), which caps most consumer credit APRs (all-in, including fees) at 36%.
What Texas does not have
Texas does not impose a universal 36% APR cap on all consumer credit (as, for example, Illinois does under the Predatory Loan Prevention Act). Borrowers in Texas will encounter a wider range of product structures, including some with all-in APRs above 36% outside of Chapter 342, than they would in rate-capped states.
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Common Uses for Personal Loans in Texas
Under § 516.02, any person or company making consumer finance loans of $25,000 or less at rates above 18% per annum must be licensed by the Florida Office of Financial Regulation. You can verify any lender in about two minutes via the OFR REAL System. This is the single most valuable check a Florida borrower can do before signing anything.
Medical expenses
Given Texas's 16.7% uninsured rate (the highest in the country), medical-purpose loans are disproportionately common here.
Debt consolidation
Combining multiple balances into a single fixed-rate loan; particularly relevant for the roughly 30% of Texans with subprime scores managing high credit card rates.
Home improvement
Especially in growing DFW, Austin, Houston, and San Antonio metros where property values have appreciated rapidly.
Auto-related expenses
Major repairs or down payments, particularly in areas with long commutes and limited transit.
Relocation costs
Texas continues to see strong net in-migration; moving expenses are a consistent loan purpose.
What Lenders in Our Network Look For
Typically $800/month minimum from verifiable sources (employment, self-employment, Social Security, disability, VA benefits, or other benefits).
All credit types considered. Some lenders work with scores starting at 580; a few have no minimum score and evaluate based on income stability.
Usually below 45–50%.
For ACH funding and repayment.
Or other U.S.-recognized identification and U.S. residency status.
What funding actually looks like
After approval, funding typically arrives within 1 to 7 business days, depending on the lender’s internal timeline and your bank’s ACH processing window. Some lenders advertise same-day funding, but this is not guaranteed and depends on application timing, verification, and your financial institution’s policies.
Texas-Specific FAQ
Is there a maximum APR on personal loans in Texas?
Texas has tiered rate ceilings under Chapter 342, not a single statewide APR cap. The default constitutional ceiling is 10% per year, but licensed Chapter 342 lenders can charge above this using the add-on or alternate rate formulas. The network partners we work with cap APRs at 35.99%. For servicemembers and dependents, the federal Military Lending Act imposes a 36% all-in cap.
How are the Chapter 342 bracket amounts updated?
Bracket amounts are indexed to the Consumer Price Index and published annually by the OCCC, typically in Q1. Because brackets shift with CPI, the effective caps on small-dollar loans change year to year. For current values, check the OCCC’s Interest Rates page or the weekly Texas Credit Letter.
Can I get a personal loan in Texas with bad credit?
Yes. With Texas averaging a 695 credit score and roughly 30% of Texans scoring below 620, lenders in the network routinely work with fair and poor credit profiles. Expect higher APRs at the lower end of the credit range, and always shop multiple offers, rate spreads in Texas are wider than in states with more homogeneous credit profiles.
What's the shortest personal loan term available?
Network partners offer minimum terms of 61 days. Maximum term is 84 months (7 years). Shorter terms cost less in total interest; longer terms reduce monthly payments but increase total cost.
Does Texas have a cooling-off period for personal loans?
Texas does not have a universal statutory rescission right for unsecured personal loans the way federal law provides for certain home-secured loans. Once you sign, the loan is binding. Review the final APR, all fees, and payment schedule carefully before accepting any offer.
Sources & References
- Texas Finance Code Chapter 342 — statutes.capitol.texas.gov
- Texas Finance Code § 342.201 (Maximum Interest Charge and Administrative Fee)
- Texas Finance Code § 342.004 (Constitutional 10% default)
- Office of Consumer Credit Commissioner — occc.texas.gov
- OCCC Interest Rate Notices — occc.texas.gov/publications/interest-rates
- Federal Reserve G.19 Consumer Credit Report — federalreserve.gov/releases/g19
- U.S. Census Bureau, 2024 ACS 1-Year Estimates — Median Household Income by State
- U.S. Census Bureau, 2024 ACS — Health Insurance Coverage by State (Texas: 16.7% uninsured)
- Federal Reserve Bank of Dallas — Consumer Credit Trends for Texas
- Experian State of Credit / Consumer Credit Review (average U.S. FICO: 713)
- Military Lending Act, 10 U.S.C. § 987
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