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Ohio Payday Loan Consumer Guide

There are a lot of different ways to borrow money including credit cards and personal loans, but most of the available methods of borrowing are for long - term financial needs and involve lengthy application processes. Not only that, but those who have had prior debt problems or who have filed for bankruptcy protection may be unable to obtain any type of conventional loan because of their bad credit.

One alternative, however, exists that provides speed, convenience and easy - qualification requirements. That alternative is referred to as payday lending. The payday loan market is very large in Ohio, with 183 lenders in Franklin County alone generating more than $37 million in fees in 2006. Payday loans are unsecured loans, issued over the short term, and are issued on the basis of very simple qualifying requirements such as having a job and a bank account. This makes payday loans an attractive and easy loan option even for those with bad credit.

Unfortunately, while payday loans are easy to get and can be obtained quickly, there are some significant downsides to using this method of borrowing. Most financial experts will advise against taking these types of loans because of the fact that you must pay a great deal of money in order to take a payday loan.

Most loans price the cost of borrowing in terms of the interest rate. The annual percentage rate (APR) is the amount of money you pay each year in interest or is the cost of borrowing money. With fast cash loans, you are charged a fee for the short - term loan. The fees and financing charges mean that you end up with a very high APR. If the financing charges and fees are equal to 17.5 percent of the value of your loan and if you take a $100 loan for a two - week period, your APR is a startling 450 percent. If you borrow money on a credit card, on the other hand, you'd probably be paying a 30 percent APR or less.

The high APR means you spend a lot of money to take a payday loan. The costs go up if you cannot pay your loan back right away and have to extend it or take out another one, and it is very easy to fall into a financial mess very quickly.

Ohio Payday Loan Laws

In June of 2008, Ohio passed the Short - Term Loan Act intended to provide protections to the public from payday loans. Under Ohio laws and limitations on payday loans, the maximum term of a payday loan was set at 31 days and borrowers were limited to taking no more than two payday loans in 90 days and no more than four loans per year. Furthermore, borrowers were restricted to a maximum of $500 in payday loans and the maximum annual interest rate was set at 28 percent.

Most payday loan lenders will not lend money at an annual percentage rate of 28 percent since this is much lower than the business model that makes these types of loans work. However, this did not shut down the payday loan industry because lenders found loopholes in order to avoid complying with the limit.

Generally, payday lenders who wanted to skirt the law ended up applying for licenses to lend not under the Short - Term Loan Act, with its strict restrictions, but under other lending laws that permitted more fees and more profits. The Ohio Division of Financial Institute's records revealed that there were around 1,500 payday loan lenders registered under other lending laws in Ohio as of 2012 and there were no licenses issued under the Short Term Loan Act.

Lawmakers worked to close these loopholes in order to prevent this, but companies can always find alternative solutions in order to maintain a profitable industry. Those borrowing from an Ohio fast cash lender, however, need to be aware of the laws and to be aware that lenders may be skirting or violating them.

Stay Educated about Payday Loans

An informed consumer is a smart consumer and you should be aware of the fast cash Ohio loan laws in Ohio so you will understand your rights and the protections available to you.