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Consumer Installment Loan Act of Illinois explained
Find out what’s involved with CILA installment loans in Illinois, and where you can get one.
The Consumer Installment Loan Act (CILA) governs the operations of all short-term, small-dollar lenders in the state of Illinois. This act came into effect in September of 1963.
Types of CILA loans
Under CILA regulations, a lender can provide an installment loan of up to $40,000. The maximum loan term is 181 months.
These broad criteria allow for many different types of loans, which include:
How does a CILA loan work?
CILA loans fall into five basic categories and vary in the amount you can borrow:
- Small consumer loans. Borrow up to $4,000 without requiring any form of security.
- Personal lines of credit. Borrow up to $25,000 without requiring any form of security.
- Check-solicited lines of credit. Borrow between $2,000 and $7,500 without requiring any form of security.
- Used car loans. Borrow up to $40,000, but the vehicle you purchase will act as collateral.
- Retail installment loans. Borrow between $500 and $8,000 without requiring any form of security.
The law has different limits in place depending on the amount advanced.
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How to compare CILA loans to other options
When you’re comparing different CILA installment loans, pay attention to these factors:
- Interest and fees. How much you end up paying in interest and fees depends on the amount you borrow, as well as the lender you choose. If you get a small consumer loan of no more than $1,500, the maximum APR your lender can charge is 99%. You may also have to pay an acquisition charge of up to 10% of the amount advanced. Other loan types for higher amounts have different fees.
- Payment flexibility. You should be able to make payments towards a typical CILA loan weekly, biweekly or monthly. Some lenders let you make payments through different methods such as direct debits, credit cards, debit cards and checks.
- Secured or unsecured. Most CILA installment loans are unsecured. However, for a a used car loan, the vehicle you purchase acts as collateral. In this case, non-payment of the loan can lead to the lender taking possession of your vehicle.
Benefits and drawbacks
- The loans are legal. When you approach a lender that abides by CILA, you know you’re getting a legal loan and can turn to state regulators if issues arise.
- Find out the cost of the loan in advance. CILA requires that lenders let borrowers know about all applicable fees and charges when applying.
- Higher cost. While CILA places caps on the APR and fees in some scenarios, loans which comply with CILA can turn out to be rather expensive. Always take a good look at how much the loan will end up costing before accepting the contract.
Things to avoid when considering CILA loans
If you think you might have trouble repaying a CILA loan, don’t take it out in the first place. Not making timely repayments or defaulting on your loan will have an adverse effect on your credit score, thus affecting your ability to get credit in the future. Applying for multiple loans around the same time can also negatively impact your credit score.
Go through the loan contract in detail before accepting it. This will give you a clear indication of the interest you’ll have to pay as well as all applicable fees and charges.
Frequently asked questions
- What minimum loan term do small consumer loans in Illinois have?
CILA states that small consumer loans can’t have a loan term of less than 180 days.
- I want to borrow $2,000 through a CILA installment loan. What’s acquisition charge cap?
The acquisition charge on CILA installment loans over $1,500 is limited to $100.
- What is the Rule of 78ths? What does CILA say about it?
The Rule of 78ths is an outdated method of calculating interest that favors lenders and not borrowers. Some lenders in Illinois still use this method, but the act prohibits its use with loans that carry terms of 61 months or more.
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