Georgia law permits certain types of installment loans. Framework, or rules, vary by lender and product. The rules for a small loan from a state-licensed finance company are different from a bank loan, larger personal loan, or title pawn. Start by looking at the legal creditor and the amount of the loan being compared to analyze loan payment rules.
Which loans follow the Georgia Installment Loan Act?
GILA applies to certain finance companies and small loan companies when they offer installment loans in amounts up to $3,000. Generally, businesses that are installment lenders require a Georgia Department of Banking and Finance license, unless an exemption is applicable. GILA covers activities such as advertising, soliciting, offering, making, renewing, or refinancing these loans.
Federally insured banks and credit unions, some other federally insured financial institutions, and qualifying wholly owned subsidiaries are exempt from GILA. Other exemptions exist. Certain loans greater than $3,000 and retail installment financing or title pawn transactions may be exempt from following the requirements of GILA. When applying these requirements, do not apply the small loan limits to every loan that is repaid over time.
Payday lending is prohibited in Georgia, except in the situations specifically allowed by law. How a lender structures a transaction or if the lender operates over the internet will not exempt the lender from Georgia law. A licensed GILA loan is a permitted category, and if the requirements of the law are satisfied, such a loan will be permitted.
Check the finance company's Georgia authority
For a covered finance-company loan, use the Department's installment-lender information and NMLS lookup to confirm authorization in Georgia. Confirm the legal name, NMLS identifier, and listed website to the company you are researching. An identifier by itself does not mean that a company's Georgia license is active.
Banks and credit unions exempt from GILA may not appear as a licensed Georgia installment lender. Verify the institution through its banking or credit union regulator. If a company claims an exemption, ask which one applies rather than accepting the claim as proof.
A website accepting a request may be a loan matching service. You need to identify both the service receiving your information and the creditor making any offer. Review the privacy policy before submitting a request; approval and a lender match, as well as funding by a certain date, are not guaranteed.
Understand small-loan rates, fees, and repayment limits
O.C.G.A. § 7-3-11 limits GILA loans to three years and 15 days, and interest to 10% per year on the contract's face amount. Consumer lending guidance provided by the Department describes these limitations and the separate prohibition on payday lending.
The 10% figure is not a true cap on APR. GILA permits specified fees in addition to interest. Interest can also be calculated in advance using the face amount versus declining balance. Therefore, the annual percentage rate (APR) can be above the interest percentage.
Get a detailed breakdown of any loan fee, maintenance charge, closing fee, insurance premium, or other charge. Just because a charge is permissible doesn't mean the charge will be assessed. Just because there is a legal maximum doesn't mean that's the charge you'll see. Compare the APR and interest rate, the cash advanced, the finance charge, and the total of payments in the final disclosures.
The payment schedule also makes a difference. For covered GILA loans with multiple payments, Department rules require equal payments at regular intervals, and the final payment cannot be more than $1 greater than another payment. The first payment is usually due within 45 days of the loan being made, and cannot be due any sooner than the regular payment interval. Just because these rules apply to Georgia personal loans, that doesn't mean that every Georgia personal loan is a fixed-rate monthly loan.
Use the contract's Georgia protections
The Department's loan-contract and charge rules require covered borrowers to receive the signed agreement and itemized information showing the actual cash advanced, charges, collateral, and payment schedule. Material blanks must be completed or marked “N/A” prior to signing. Retain the final documents, including any separate authorizations for electronic payment.
You can pay off a covered GILA agreement in full at any time. Under certain conditions, paying off the agreement early can get you a refund of some of the interest charged. You should ask for and keep a dated payoff quote, and ask for an explanation of any refund instead of calculating the remaining scheduled payments yourself.
For a covered late installment, a licensee may charge the greater of $10 or 5% of that installment if it is more than five days past the due date. A licensee may not collect that late charge more than once for the same default or hold an unearned late charge in advance. The five-day threshold relates to the fee; the due date of the payment has not changed.
Certain products and services sold with a covered loan must be disclosed separately if incidental to the loan. Disclosures must include the cost of the product or service and state that purchasing the product or service is not necessary to obtain the loan. Insurance has special rules, so ask which coverages are required and which are optional, and see if you are allowed to provide your own policy. Ensure any declined optional item is removed from the final loan agreement.
Compare the offer you actually receive
Lender requirements vary. They may assess your identity, income, credit history, and obligations, and review bank statements or other records. Find out what documents are accepted for seasonal and/or self-employed income. Find out if an initial check uses a soft or hard credit inquiry before authorizing it.
An unsecured loan pledges no asset as collateral. If a loan is secured, property is at risk if the debt is not repaid. GILA does not make a secured installment loan equivalent to a title pawn. Thus, identify the product and read the collateral provisions carefully.
Use the actual payment dates and cash advanced to assess whether the offer solves your expense. A smaller payment spread over a longer term can increase your total cost. If a bill is the immediate concern, compare a direct payment arrangement with taking on another loan. Contact the lender promptly if you expect difficulty with a scheduled payment.
A mailed check can start a loan
Cashing an unsolicited live check may activate a loan. Current Georgia rules require covered checks to identify themselves as loans and explain that cashing creates a repayment obligation. Terms and conditions must be read before depositing a check. A check arriving in the mail is not free money. A loan obtained this way has to comply with GILA.