Everyone has a sudden need for a quick few hundred bucks now and then, and if you have that need and live in Connecticut, you should know what the rules are for taking out a short term loan.
No Payday Loans Allowed in Connecticut
Payday loans are one type of short term loan that is not allowed in Connecticut via the state statue. This may seem like a bad thing, but in reality it is done in order to protect Connecticut residents from fees that sometimes run as much as 700 percent as calculated annually.
The usury limit in Connecticut for lenders that aren’t banks or other exempt places is 12 percent a year. Plus, to be allowed to give a loan under $1,000 a lender has to have a license under the Connecticut’s small loan law. That law requires higher interest rates, but as high as on the payday loans in other states. Another part of the Connecticut statute authorizes and gives licenses to places that cash checks, but doesn’t have a provision for these to give loans.
Interest Charges on Small Loans in Connecticut
If a lender is licensed by Connecticut law, then they are allowed to charge 19.8% on an open-end loans, or $17 per $100 for the first $600 borrowed and $11 per $100 for closed end loans up to $1,800 if unsecured. If secured, it is also $11 per $100 up to $1,800 borrowed. The total percentage of interest on a closed end loan is normally up to about 21 or 22 percent interest, which is still quite a bit lower than the payday loans offered in other states.
One possible barrier that also prevents payday loans in Connecticut is that the law prohibits what is called an assignment of wages. That is something that means the loan was made with the lender expecting it would be covered by the person’s next paycheck
How Can Businesses Get Licensed to Give Small Loans in Connecticut?
If a lender wants to be able to give a small loan up to $1,000 in Connecticut, they must get licensed in the state and submit the basic required contact information, as well as pay a fee of $250. They will then be investigated by the state commissioner and they will decide if the owner has a good character and that the new business would be providing a valuable service to the public. Plus, the business must also always have $10,000 in available liquid assets for each location they want to open. Then, they must post a sign stating their fee schedule, i.e. listing the interest amounts as stated earlier in this article.