An installment loan is one in which the borrowed money is repaid in a series of payments. A given Arizona lender and the type of loan will govern which state rules will be applicable. It is important to identify the creditor, understand the rates and fees and verify the repayment schedule fits your income before agreeing to the loan.
Which installment loan options follow Arizona's consumer-loan rules?
Personal cash loans may be available from licensed consumer lenders, banks and credit unions. An unsecured loan does not pledge property. With a secured loan, the lender may be able to repossess the collateral, e.g., a vehicle, if you default. Availability, eligibility and costs vary by provider.
Arizona's authorization for payday loans lapsed in 2010. Currently, laws for installment loans rely on the lender and product. Breaking up a payment into multiple installments does not make an otherwise unlawful loan legal.
The rates, fees and term limits below are for closed end consumer loans made under the authority of an Arizona consumer lender license. Using Arizona's definitions, these are direct cash loans for personal, family or household use with a principal amount of $10,000 or less. In testing this definition, finance charges and permitted fees are not included in the principal amount.
These limits don't always apply to personal loans. The chapter's exemptions include closed-end loans greater than $10,000 and covered transactions by banks and credit unions regulated by other applicable laws. Sections of the law may allow vehicle-title finance transactions to follow separate rules. Identify the actual product before applying the limits on this page.
Check the lender and any service handling your request
Check the creditor's legal name and applicable license by doing a license search on the Arizona Department of Insurance and Financial Institutions' website. Select the financial institution or enterprise search, rather than the insurance search. The same page offers links to sites for banks and credit unions.
Match the business name in the search results with the company named in the loan agreement. If you cannot establish which license or exemption applies, ask the regulator before sending sensitive information or accepting the loan. A license confirms authority to conduct specified business; it does not guarantee approval or affordable terms.
A loan matching service passes along information to potential lenders. It does not make the loan and is not involved in determining the loan terms. In Arizona, the definition of "consumer-lender" includes advertising, soliciting, or procuring covered loans. Therefore, a referral alone does not exempt a person from requiring a license. Check who receives your information and which company would be responsible for the loan.
Understand Arizona's rate limits and permitted fees
For covered consumer loans as described above, Arizona's finance charge statute establishes the following maximum consumer loan rates. A legal maximum is not a rate every lender charges or a promise you will receive an offer.
| Original principal | Maximum annual consumer-loan rate |
|---|---|
| $3,000 or less | 36% |
| More than $3,000, up to $10,000 | At the rate of 36% on the first $3,000 and 24% on the remaining principal, or an equivalent blended rate allowed by the statute. |
These rates do not cap all-in APR. The annual percentage rate (APR) is the cost of credit on an annual basis and includes all applicable finance charges. Legally permitted fees can increase the APR to be greater than the consumer-loan rate.
Arizona's permitted-fee rules cap covered loan origination fees at the lesser of 5% of the loan amount or $150. There are also restrictions on the charging of a second origination fee on a loan that is refinanced within 1 year. The statute allows a delinquency fee of 5% of the installment that is more than 7 days past due. Other charges are dependent on the product, and described in the law.
Example for a Hypothetical Fee: For a $2,000 covered loan, a 5% fee would be $100. Thus, the fee ceiling would be $100. Let's say this fee was taken out of the proceeds of the loan. You would then receive $1,900 and the principal would remain $2,000.
This example presents a permitted ceiling, not an actual offer. Other lawful charges and interest would affect the total repayment amount. Financing a fee would affect the balance and repayment amount differently.
Consider how much you will actually receive with the expense you need to cover, and then determine the APR, finance charge, and total payments shown in the loan agreement. A lower installment does not necessarily mean a lower total cost.
Review the term, payment schedule, and early-repayment rights
Arizona's term and payment rules set these maximum scheduled terms for covered consumer loans. These limits are not terms that a lender must offer.
| Original principal | Maximum scheduled term |
|---|---|
| $1,000 or less | 24 months and 15 days |
| More than $1,000, up to $2,500 | 36 months and 15 days |
| More than $2,500, up to $4,000 | 48 months and 15 days |
| More than $4,000, up to $6,000 | 60 months and 15 days |
| More than $6,000, up to $10,000 | The period of time agreed to by the lender and borrower. |
Repayment of principal and finance charges for a covered consumer loan must be scheduled in roughly equal periodic installments. However, this doesn't mean that every installment loan has to be a product with monthly payments or a fixed rate. Check the payment frequency, whether the rate is variable, and the date of the last payment.
Arizona law states that licensed lenders must permit borrowers to make payment of scheduled installments in advance or any additional amounts during business hours. The lender may take the payment to finance charges already accrued. Ask what effect an additional payment will have on the balance and schedule. Also, request what the payoff amount will be on the date you choose to make the payment.
Certain loans have interest calculated in advance and are known as precomputed finance charges. For covered precomputed loans, separate refund rules require a refund or credit of certain unearned finance charges when the loan is paid off early. Therefore, do not assume your payoff amount is the sum of all the remaining installments.
What a lender may ask for when reviewing an application
A lender may require identification, contact information, income records, records of debts, and information about bank accounts. Standards and required documents may vary. For irregular or seasonal income, records should be presented that cover a period of income activity as well as a period of little or no income activity. The records should show the proposed payments are within the borrower's ability to repay.
Ask what credit inquiry the lender will use and when. A soft inquiry won't affect your credit scores, and a hard inquiry can. An advertisement saying "no credit check" does not mean that the company will review no credit information or guarantee approval.
Make the offer fit your actual cash flow
Plan the suggested payment dates with your expected income and your current bills. See what is remaining for your housing, food, utilities and transportation and your current debts for the term. If a payment is only manageable in a high-income month, a longer commitment may still be difficult to repay.
When you owe an expense to a provider, see if they would allow you to make payments directly to them instead of taking out a loan. Keep the signed agreement and payment records if you take out a loan. Contact your lender before you think you will miss a payment to see if they would allow an extension or hardship change to your due date. If so, be sure to get the new terms in writing and how it affects any fees and the repayment schedule.