A growing number of Texans struggling with delinquent property taxes are turning to risky tax loans even as the state attempts to crack down on the lenders. Consumers who use property tax loans risk losing their homes if they default on even a small loan. Fees can run into thousands of dollars, and interest rates top out at 18 percent. “They are the payday lenders for property taxes,” said Robert Doggett, an attorney with the Texas Low Income Housing Information Service, referring to the quick-cash loans issued by storefront lenders at often exorbitant interest rates. An estimated $100 million in taxes was paid to local governments in Texas last year through the loans.

Tax lenders receive the tax lien on the homeowner’s property from the county or school district as part of the loan agreement. They say their loans can help consumers avoid high penalties assessed on the unpaid taxes. The Texas Property Tax Lenders Association, which represents about 75 percent of lenders, says that it initiated 11,750 loans in 2006 and foreclosed on only 34 homes.

But consumer advocates and mortgage lenders say there are better ways to pay the taxes, including unsecured credit card loans, creation of escrow accounts or refinancing. Most counties offer payment plans to help homeowners. An indication of the growth of property tax loans is reflected in the increase in the number of tax lien transfers — from a local government to a loan company — in the state’s largest counties, according to a recent report by the Center for Public Policy Priorities. The jump was most remarkable in Travis County, where tax lien transfers went from about 50 in 2005 to an estimated 1,250 in 2007, after lending companies increased their marketing in the state capital.