Payday Loan Consolidation in Kentucky

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A Complete Guide to Payday Loan Consolidation in Kentucky

Kentucky is slowly seeing the end of payday loans in their state. Lawmakers have made it a priority to end the practice by clamping down on licensing for lenders. However, laws remain in place that can make payday loans very dangerous for borrowers, such as the uncapped interest rate on these types of loans. For borrowers facing financial difficulties due to payday loans, payday loan consolidation offers a way back to stability. 

Payday loan laws in Kentucky

Kentucky has gone to war with payday loans in recent years, leading to the practice petering out across the state. Though there is still no cap on the APR for payday loans, Kentucky instituted a new rule in 2019 that prevents the issuing of new licenses to payday lenders. So while lenders are allowed to legally operate in the state, it’s only a matter of time before they cease to exist in Kentucky. 

Payday loans are limited to $500 across two simultaneous loans with a maximum term of 60 days. Interest rates can reach 460% and beyond with no rollovers allowed on the loan. There is no cooling-off period in Kentucky meaning borrowers can immediately take out another loan once the previous ones are paid off. Kentucky maintains a database of all payday loans in the state that lenders must adhere to. For every $100 borrowed, lenders can charge an additional $15 fee. Lenders can also charge borrowers a non-sufficient funds fee, though the limit isn’t specified.

Read more about payday loan laws in Kentucky.

What will happen if you can’t repay a payday loan in Kentucky

While borrowers cannot go to jail for being unable to repay their payday loan in Kentucky, the lender still has the power to pester you. Lenders can bring borrowers to court for failing to repay along with having the ability to contact you directly asking for money. Lenders are not required to check a borrower’s ability to pay back their loan, so you enter into an agreement at your own risk. If you run into an issue with a lender, contact the Kentucky Office of Fiancial Institutions to file a complaint.

What is the statute of limitations on payday loans in Kentucky?

The statute of limitations in Kentucky is ten years. This means lenders have six years to try and collect the debt via the courts if the borrower is unable to pay back their loan.

How to consolidate your payday loans in Kentucky

For Kentucky borrowers stuck with a pile of payday loan debt, payday loan consolidation can offer a manageable way to rid yourself of your burden. By grouping a borrower’s total debt into one loan with a reduced rate, borrowers can more easily chip away at their debt over time. Consumers will usually work with a third-party company who will first pay off your debt from the payday lender. In exchange for getting the lender off your back, borrowers will then make fixed payments directly to the third-party company instead until the amount is paid off. 

Another option borrowers can consider is to take out a separate loan that you would use to pay down all your other loans. Many lenders offer debt consolidation loans, and they have different options depending on the borrower's credit score. This strategy allows a borrower to get their loans all on one plate with a single (hopefully lower) interest rate. Taking out another loan does come with risks, however, including additional fees, penalties, and the chance for even more debt to build up. 

Borrowers can also consider a debt management plan (DMP) to pay down their debt. A DMP is similar to the payday loan relief option mentioned above where all of a borrower’s debt is lumped together under a single, fixed interest rate. This makes it more manageable for the borrower to repay. There is no 3rd party with this option, so borrowers have to come to an agreement directly with their lender. Selecting one of these methods can be the first step toward getting a borrower’s financial status back to normal. 

By the numbers: Payday lenders in Kentucky

  • Max loan term: 60 days
  • Average loan amount: $300
  • Maximum loan amount: $500
  • APR Cap: None, average is 460%
  • Number of payday lenders in Kentucky: 226
  • Average 14-day payday loan APR: 460%
  • Collection fees:  $15 fee for every $100 borrowed plus an unspecified NSF fee. 
  • The poverty rate in Kentucky: 16.3%



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How can I get help paying my payday loan in Kentucky

Dealing with payday loan debt can be one of the most debilitating financial situations a borrower can find themselves in. While Kentucky is heading in the right direction in terms of addressing payday loans in the state, consumers are still susceptible to their predatory practices. Borrowers in this scenario should consider one of the payday loan consolidation methods above to get themselves back on track.

Kentucky Office of Financial Institutions

500 Mero Street

Frankfort, KY 40601


Additional state resources to utilize: 

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