Payday loans, and other short-term loans, are a useful tool when you’re facing a tough financial situation, but Ohio hasn’t always had the best regulations. With new regulations in place and more flexibility in loan terms, you may be able to avoid paying high fees. Just make sure your lender is up-to-date with Ohio’s laws before you borrow.
Can I get a payday loan in Ohio?
Yes. In October 2018, Ohio changed its regulations for payday loans – and other short-term loan options – to better enforce the interest rate cap and prevent lenders from charging consumers hefty fees.
Under the Ohio Revised Code Ann. 1321.35 et seq, payday loans have an interest rate cap of 28%. The lender you borrow from must be licensed by the state of Ohio, and when you borrow, you’ll face these restrictions:
- Maximum loan amount: $1,000
- Minimum loan term: 91 days
- Maximum loan term: 1 year
- Interest: 28%
- APR: 60%
- Monthly maintenance fee: 10% of the principal or $30, whichever is lesser
- Origination fee: 2% of a loan amount greater than $500
- Check collection charge: $20
- Prepayment penalty: Lenders can’t charge a prepayment penalty
Your loan may be less than 91 days if the total monthly payment on your loan doesn’t exceed 6% of your gross monthly income or 7% of your net monthly income, whichever is greater.
These laws make payday loans more difficult to come by, so you should expect to find more lenders offering installment loans. Make sure you review your loan contract carefully. If a lender doesn’t abide by these new regulations and attempts to charge you excessive fees, stay away. There are plenty of lenders out there, so don’t settle for one that’s willing to skirt the law.
What happens when I get a payday loan?
Lenders are required to provide you with a loan contract must be provided to you and include the terms and conditions of the loan, the total amount you need to pay back to your lender, when your payments are due and a warning about the high cost of a short-term loan.
If you agree to take out a loan, you have the right to cancel your loan by 5 p.m. on the third business day after your loan contract is finalized. A lender is also limited in the number of times it can attempt to collect your payment: it is not permitted to collect from your account after two failed consecutive attempts.
Ohio law also sets a cap on the total amount you can have out at any time. You may have no more than $2,500 in short-term loans borrowed and will be required to sign a declaration that you can legally borrow the loan.
If I have a problem with a lender, who should I contact?
If a lender has violated any of Ohio’s regulations, contact the Ohio Department of Commerce Division of Financial Institutions to file a complaint. A violation on the lender’s part voids your loan contract, meaning you won’t be held responsible to pay back any principal, interest, fees or other charges.
Payday loan alternatives in Ohio
Payday loans, and other short-term loan options, aren’t always the right choice if you’re struggling with bills and have consistent financial issues. To lower your daily costs, you may want to look into assistance programs like Medicaid, the Emergency Food Assistance Program (TEFAP) or the Home Energy Assistance Program (HEAP). You can also browse your other payday loan alternatives to see how else you can avoid taking out a high-cost loan.
With recent changes to Ohio’s payday loan laws, you’re in a better position to save money when you need a short-term loan. However, this doesn’t mean it won’t cost you. Payday loans are still an expensive option, so carefully compare your options before settling on a lender.
Frequently asked questions
Do I have to provide proof of income?
Yes. You must provide your lender with a recent pay stub or other evidence of recurring income within the past 45 days.
Can I cancel my loan?
Yes. Ohio law gives you the right to cancel your loan by 5 p.m. on the third business day after you finalize your loan contract.
Can I refinance my loan?
Yes. You can refinance your loan. Your lender may not charge or collect a monthly maintenance fee, and if you repay or refinance your loan before the due date, your lender is required to refund a prorated portion of your interest and other charges.
Can a lender take criminal action against me if I don’t repay a payday loan?
No, but the lender can initiate civil action and you may be liable for damages up to the original amount you borrowed.
Are auto title loans legal in Ohio?
No. Lenders can’t accept the title or registration of a vehicle or other assets as collateral for a short-term loan.
Can I get a loan over the phone or by mail?
No. Ohio law specifically prohibits lenders and short-term loan brokers from lending to borrowers over the phone or by mail.