Installment loans in Hawaii are made up of small-dollar loans regulated under Chapter 480J, and personal loans regulated by other laws. For a covered small-dollar loan, the $1,500 limit, maintenance fees, and repayment period work together. To evaluate a loan offer, check the product and lender before using any of these limits.
Separate covered small-dollar loans from other personal loans
Hawaii's small-dollar installment-loan system replaced its payday-lending law in 2022. A covered loan can't be greater than $1,500. At a given time, a consumer can't have more than $1,500 in loan funds from a single lender. Also restricted are multiple loans from the same lender and certain parties related to the lender.
Chapter 480J excludes certain lenders, including banks and credit unions with federally insured accounts, as well as financial services loan companies that are not authorized to accept deposits. It also excludes loans made in anticipation of a tax refund and credit plans that qualify as open-end under the Truth in Lending Act. Larger personal loans must be evaluated under separate authority and applicable laws. The term installment loan refers to a loan repaid in several payments. It is not a definition of a legal category of loan.
Loans covered by Chapter 480J cannot be secured by a lien on your property. If a lender asks you to pledge a vehicle or other asset, do not assume it is the small-dollar loan described here.
Check the amount and contracted repayment period together
The rules in Chapter 480J limit covered loans in the following ways:
| Loan amount | Minimum term | Maximum term |
|---|---|---|
| $500 or less | 2 months | 12 months |
| $500.01 through $1,500 | 4 months | 12 months |
For the minimum term requirement, a lender may count a month as 28 days or longer. There are different payment schedules. Payments may be monthly, twice a month, or every two weeks. Different schedules will affect the actual dates and number of payments. Twice-monthly and every-two-week schedules differ from each other.
The loan must be structured to repay the principal fully over its term. A longer permitted term may reduce each payment, but maintenance fees can add cost while the balance remains outstanding.
Distinguish the interest ceiling from APR and dollar charges
Hawaii law puts an annual interest limit of 36% on the unpaid principal balance of covered loans. Allowed monthly maintenance fees are in addition to the 36% cap. As such, 36% is not an all-in APR cap.
| Original principal | Maximum monthly fee |
|---|---|
| Up to $299.99 | $25 |
| $300 through $699.99 | $30 |
| $700 through $1,500 | $35 |
These fees are earned monthly in arrears and are subject to the repayment rules linked above. Fees are prorated for part of a month. Maintenance fees cannot be added to the balance on which the lender charges interest. Maintenance fees are prohibited for active-duty service members and their dependents.
Total loan charges cannot exceed 50% of principal. In the case of a covered loan of $1,000, the statutory cap on charges would be $500. This is a maximum, not a quoted price. The definition of "loan charges" excludes certain default and insufficient funds charges; therefore, a borrower could end up paying more if payments are not made. An allowed optional convenience fee of up to $1.00 for using a debit card to make loan payments is also excluded from "loan charges."
Hawaii prevents origination and deferment fees on these loans. A $30 default charge may apply to an installment still unpaid after 10 days. Separate rules apply to authorized insufficient funds charges. A lender can't charge an insufficient funds fee for a rejected debit card payment.
Disclosed APR reflects interest and monthly maintenance fees. It must be read in conjunction with total borrowing costs and written payment schedule. APR for one offer must not be compared with interest rate for another offer.
Verify the Hawaii lender before sharing application details
Identify the company that will be named creditor. Hawaii's Division of Financial Institutions provides a list of authorized small-dollar installment lenders. Use the list to locate the company. Confirm the company is still authorized to operate with the division before disclosing any sensitive information. Also, ask the division regarding any claimed exemption.
A loan matching service and creditor could be different companies. Learn what information the service collects and who receives it. A request form, license listing, or credit review doesn't mean you'll be approved, get a certain rate, or know when your loan will fund.
Requirements differ by lender. They may request your identification, contact information, income, and/or bank account information. Be sure to read and understand any credit inquiry authorization forms you sign. Sometimes, lenders use hard inquiries to check your credit.
Know the cancellation and early-repayment rights
A covered borrower can cancel a loan without a charge by returning the principal to the origination location by 5 p.m. Hawaii time on the third business day after origination. Covered borrowers can use the state rescission rule to learn about the methods of return. The covered borrower can return cash, the original lender's check or money order, or the other original disbursement of loan proceeds. Before the return deadline, covered borrowers should review the cancellation notices and instructions.
You can also prepay a covered loan fully or partly, without charge or penalty. Past-due interest and fees must be paid first. A full early payoff requires a refund of unearned interest and maintenance fees. Request a dated payoff amount to be sure what is due.
The loan agreement should show the name of the creditor, the amount borrowed, the interest rate, APR, finance charge, and the complete payment schedule. Make sure to save the agreement and disclosures before signing.
Use the repayment schedule to test your budget
Compare each payment with the money left after essential bills. If your income varies, use an ordinary or lower-income period for this check. Legal limits do not establish what your household can afford.
Covered small dollar loans are designed to be short-term cash solutions. Renewing or refinancing these loans can result in additional charges. Determine if the expense would make you need to take another small-dollar loan. If that's the case, contact the bill provider to see if there is a way to pay the bill that doesn't involve taking out another loan. Consider your options and find the lowest-cost option available to you.