Repayment for installment loans in Connecticut happens through a series of scheduled payments. The rules that govern loan offers differ by lender and loan type. For many nonbank personal loans, Connecticut's small loan law imposes limits on costs and provides repayment protections.
Which Connecticut installment loans follow the small-loan rules?
Small covered loans generally refer to consumer loans of $50,000 or less with an annual percentage rate (APR) above 12%. These types of loans can be advances against future income. This page covers closed-end personal installment loans. These loans contain a specific amount that is to be paid back within a specified time frame. Earned-wage advances have separate provisions.
Federally insured banks and credit unions, along with certain subsidiaries, fall outside these small-loan provisions. Residential mortgages, qualifying retail installment contracts and business purpose credit also are outside the definition of small loans. However, offers of credit outside the definition of small loans are subject to the requirements of the laws that regulate their lender and product.
Personal loans from banks and credit unions may be secured or unsecured. Covered nonbank small loans generally cannot take collateral, except for a limited case of motor vehicle loans (i.e., loans to purchase or refinance a motor vehicle). Not all advertised installment loans are covered by the same rules.
Verify the lender and the service taking your request
Look up the legal name of the creditor before accepting an offer. The Connecticut Department of Banking's small-loan company verification page has a licensee list and provides access to NMLS Consumer Access. Review the legal name, Connecticut license status, and contact information. Contact the department about a claimed exemption if the company's authority is unclear.
Connecticut's licensing requirements may cover brokers, arrangers, and lead generators. A loan matching service may provide your information to other companies, while a different company makes the loan. Review who may receive your information and confirm the roles of both companies. A listing or license does not guarantee approval or acceptable terms.
Understand the APR limits for covered personal loans
Connecticut's small-loan statute sets different APR maximums by loan amount for covered installment loans other than loans made solely to purchase or refinance a motor vehicle:
| Loan amount | Maximum statutory APR |
|---|---|
| Less than $5,000 | 36% or lower applicable maximum under the Military Lending Act |
| $5,000 through $50,000 | 25% |
The motor-vehicle exception has separate, lower APR limits. These are legal ceilings for covered loans, not rates every borrower will receive. Connecticut uses an APR calculation based on the Military Lending Act. Its definition includes connected finance charges, including certain membership, service, and ancillary-product charges and even voluntary fees. This state-law measure can include more costs than the ordinary Truth in Lending APR disclosed for a loan.
Check the finance charge and total of payments in dollars as well. The cost of credit varies with the amount, term, and permitted charges. Do not rely on an advertised interest rate to determine if every charge complies with the Connecticut rate cap.
Check fees, repayment terms, and early payoff
Section 36a-558 bans adjustable rates and prepayment penalties for small loans covered by the Small Loan Act. Scheduled regular payments must fully repay the principal and cannot allow the principal to grow. The interest rate for a covered closed-end loan cannot increase because of a payment default.
The law permits certain contingent charges. A lender may assess a late fee only after a scheduled payment has been overdue for ten calendar days. The late-fee limit is 5% of the installment's unpaid amount, calculated without earlier late charges. Total late fees are also capped at $25 per month, and the lender cannot charge interest on them. A returned-payment fee cannot exceed $20. A lender can collect a payment deferral charge only with your specific permission in writing. The charge cannot be higher than the interest due for that billing cycle.
These permissions will not cover any additional origination fees on a closed-end small loan. Review all charges in the loan agreement. If you wish to pay off the loan before the maturity date, obtain a payoff figure and have it dated, and confirm how the payment will be applied.
What a lender may review before making an offer
Application requirements can vary by lender. Some may require identification, contact information, income information, and bank account details and/or permission to review credit information. The documents required can vary based on whether you receive your income from employment, self-employment, or other sources.
Please read the credit inquiry consent before submitting the request. A hard inquiry may affect your credit score, and an initial request does not necessarily use only a soft inquiry. Submitting an application does not mean that an offer will be extended. A legal lending limit will not mean what a particular applicant will be approved to borrow.
Choose an amount and schedule you can repay
Ensure you have enough money to pay your bills due each pay period. Leave room for housing, food, utilities, and transportation. You need to leave some room for the unexpected. Take into consideration the legal loan rate; a loan within this limit can stretch your budget too thin.
If the payment would leave a recurring shortfall, consider a lower amount. You may also want to ask the creditor you need to pay about a direct payment arrangement. Prior to acceptance of any offer, request to save the final cost disclosures and the payment schedule. The agreement should also show the name of the lender and the terms you are agreeing to.