The State of Kentucky Guide to Payday Loans

Payday loans can sometimes be a godsend, especially when someone needs fast cash really bad. However, it can be someone’s bane as well. Financial advisers generally advise people to stay away from payday loans or any other short term, high interest loans as they have the tendency to add more financial worries, rather than lessen them. That is why certain states do not allow payday loans.
In the states that do allow them, like Kentucky, the industry is heavily regulated.

If you find yourself in need of a quick loan and are considering applying for a payday loan, use this article as your guide. First, what is a payday loan?

A payday loan is a type of short term, high interest loan, whose main purpose is to provide borrowers easy access to quick cash without the hassle of background checks and other strict requirements. Due to state regulations, it is only legal to get payday loans from check cashers and not from other sources like pawn shops. The borrower only needs to write a check to the lender for the amount of the loan needed plus the finance charges then it is all done. Payment of the entire amount will then happen on the borrower’s next payday.

Loan Terms
The maximum loan amount for payday loans in Kentucky is $500, regardless of the borrower’s gross monthly income, unlike other states wherein a loan ceiling is imposed based on a certain percentage of the borrower’s gross monthly income. The going rate is normally between 20% – 25%.

The loan term, or the length of time wherein a person needs to pay the loan off is between 14 – 60 days. The finance rates and fees are at a maximum of $15 per $100 on the check’s face value plus a $1 database fee. Finance charges for a 14-day $100 loan is $17.65 whereas the APR or Annual Percentage Rate for the same type of loan is at 459%

Debt Limits
Borrowers are allowed a maximum of two outstanding loans at a time, which cannot be rolled over. Rollover is the term used when only the interest is paid off and the principal loan amount gets rolled over to the next pay period. There are no cooling off periods in between loans and allowing any type of repayment plans is not specified.

Criminal actions against borrowers who fail to make payments on payday loans are prohibited but there are still some consequences of nonpayment or delays in the payment of payday loans. Foremost would be an adverse effect on the borrower’s credit rating. An NSF or Non Sufficient Funds fee can also be charged, if expressly specified in the loan agreement.

How to Get Information or File Complaints
To know more about payday loans, you can pay a visit to or call the regulator, which is the Kentucky Office of Financial Institutions. They are located in Capital Center Drive, Frankfort KY 40601 and they can be contacted via landline (800) 223-2579 toll free and fax (502) 573-8787.

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