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A Complete Guide to Payday Loan Consolidation in Ohio
Those living in the state of Ohio used to be thrashed by payday loans. For years, the state was a breeding ground for payday lenders, with over 1600 lenders located in Ohio in 2007. Thankfully, recent legislation has attempted to correct the course. For those still struggling with payday debt, however, payday loan consolidation is here to help.
Payday loan laws in Ohio
Ohio used to be one of the worst states in the country when it came to payday loans. Before October 2018, an average payday loan had an APR of 677%. This was due to the fact that payday lenders could register as mortgage lenders under Ohio’s Mortgage Lending Act. By doing so, lenders were not obligated to follow the state’s payday loan regulations.
Things were vastly reformed in 2018, which saw lawmakers institute a strict 28% APR cap on payday lenders. Though payday loans remain legal in Ohio, the maximum loan amount is $1000. Borrowers have a minimum loan term of 91 days and a maximum term of one year. Only one loan can be taken out at a time, and rollovers are not allowed. It is prohibited for a borrower to carry more than a $2500 outstanding principal across multiple loans. The total cost of the loan cannot exceed 60% of the loan’s original principal.
Lenders are also limited in the fees they can charge. Monthly maintenance fees must be less than 10% of the loan’s principal or a flat $30. Ohio allows a 2% origination charge for a loan that is $500 or more, though no interest can be charged on this. According to Ohio state law, a lender cannot charge a monthly maintenance fee if the borrower is an active duty armed forces member or a dependent of that person. An ability-to-repay (ATR) requirement must be followed by the lender for loans under 90 days. In these scenarios, monthly payments should not exceed $7 of a borrower's monthly net income or $6 of gross income, whichever is greater.
Read more about payday loan laws in Ohio.
What will happen if you can’t repay a payday loan in Ohio
Lenders could potentially file a lawsuit against you, get a judgment against you in court, ask the court to seize assets you own to cover the debt, or legally pursue the debt through the court systems. However, they cannot threaten you with jail time and you cannot go to jail for being unable to pay back a payday loan.
As of July 2020, lenders are not required to check a borrower's ability to repay. You enter into an agreement at your own risk. That said, lenders must obtain an Ohio Short-Term Loan Law license in order to legally operate in the state.
If a borrower needs assistance with payday loans or other lender issues, contact the Ohio Division of Financial Institutions.
What is the statute of limitations on payday loans in Ohio?
In Ohio, the statute of limitations on payday loans is eight years. This means that if you are unable to pay back your loan, the lender has eight years to try and collect the debt via the court system.
How to consolidate your payday loans in Ohio
Luckily, borrowers who are feeling trapped by their high-interest debts have a few ways to ease the burden. Payday loan consolidation — sometimes called credit consolidation and payday loan relief — lumps your debts together. This gives you one lower monthly payment, hopefully with a lower interest rate. To make this happen, borrowers will collaborate with an outside company that works with you to create a manageable payment plan. Often, they'll pay off your current loans and negotiate with the lenders to see if they're willing to reduce the amount you still owe. In exchange, instead of paying lenders directly, borrowers make one monthly payment to the debt consolidation company.
The next strategy only works if you have relatively good credit: Take out a loan, and use it to immediately pay down all your other debts. It can provide a big financial boost if you can get everything you owe merged into one single loan with a lower interest rate and a lower monthly payment. Just remember that you'll face late fees and other penalties if you miss a payment, and if you can't make your payments on time you may end up with a higher interest rate.
A third option to consider is a debt management plan (DMP). A DMP is similar to a loan consolidation program in that you roll together your debts and pay one set monthly payment. The difference is that you’re still paying back your original loan amount — a third-party company won't be negotiating on your behalf to reduce your original debt. Debt management plans are usually a fairly inexpensive option, because they're run by nonprofit credit counseling agencies. You'll usually pay a monthly fee ranging from $25-$55.
By the numbers: Payday lenders in Ohio
Here’s what you can expect from a typical payday loan taken out in Ohio:
- Max loan term: One year
- Average loan amount: $500
- Maximum loan amount: $1000
- APR Cap: 28%
- Number of payday lenders in Ohio: 280
- Average 14-day payday loan APR: 28%
- Collection fees: Monthly fee that’s less than 10% of the loan’s principal or $30. There is also a 2% origination charge for a loan of $500 or more.
- The poverty rate in Ohio: 13.1%
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How can I get help paying my payday loan in Ohio
If you find yourself in need of assistance with your Ohio payday loan, getting some form of payday loan relief is essential. Whichever debt consolidation method you decide on, it can be the first step back toward financial stability. Contact the Ohio Division of Financial Institutions if you are in need of payday loan help, there you can also file a complaint about a lender or issue you’ve encountered.
Ohio Division of Financial Institutions
77 S High St, 21st Floor
Columbus, OH 43215
Phone number: 614-728-8400
Additional state resources to utilize: