When considering an installment loan in Illinois, check with the creditor about the disclosures and the rules covering the offer before assessing payments. Many of the nonbank consumer loans in Illinois are subject to the 36% rate cap. This means there may be charges beyond what is shown in the disclosed APR. The cap puts a legal limit on the terms of the offer; it does not mean that the lender will make an offer at that rate, or that the offer will be affordable to the consumer.
Understand Illinois's 36% consumer-loan cap
Starting March 23, 2021, the Predatory Loan Prevention Act (PLPA) limits covered new loans and renewals to a 36% annual percentage rate (APR), calculated using the military APR method. Illinois calls this the PLPA APR. The APR protection under PLPA is not restricted to service members and their families.
Lenders that are authorized under qualifying state or federal laws, namely banks, savings banks, savings and loans, credit unions, and insurance companies, are exempt from the Act. Other laws can still govern their loans. A nonbank company, however, cannot automatically evade the Act by stating that it is acting as a service provider for an exempt institution. The Act includes provisions against arrangements that evade its requirements.
The PLPA APR includes interest and charges such as credit insurance, debt cancellation products, application fees, and other credit-related add-on products. Therefore, an optional product may affect this calculation even if it is excluded from the ordinary Truth in Lending APR. Ask for the PLPA APR and an itemized list of charges before accepting an offer covered by PLPA.
The Act establishes that loans that violate the Act are void. If you suspect that a loan offer or existing account exceeds the limit under the Act, you should contact the state regulator or a legal adviser qualified to review the lender and transaction.
Licensed consumer installment lenders have their own limits
Illinois's Consumer Installment Loan Act (CILA) governs a particular type of licensed lender. It limits the principal amount to $40,000 and the aggregate principal owed to the licensee and related affiliates or agents to $40,000 for loans under the Act. The maximum repayment period is generally 181 months for CILA loans. These are legal ceilings for CILA lending and do not represent amounts or terms a lender is required to extend. The Act does not describe every bank, credit union, or mortgage loan product.
Payments for an interest-bearing CILA loan must fully repay the balance through substantially equal consecutive weekly, biweekly, semimonthly, or monthly installments. Choosing a long, statutory maximum does not make a long loan the best choice for a small expense. Consider how much interest and other charges you would pay over the full term proposed.
Read the rate-cap notice alongside the cost disclosure
As stated by the CILA rules, a separate rate-cap disclosure signed by the consumer must be included in the loan documents. This rate-cap disclosure notifies the consumer of the 36% PLPA APR limit and states that the APR shown in the contract may be lower than the PLPA APR, and that the difference is relevant for purposes of fees and insurance.
| Figure | What to check |
|---|---|
| PLPA APR | The annual percentage rate used to evaluate a covered loan against Illinois's 36% limit. |
| Disclosed APR | The cost shown in the federal cost disclosure is annual. It may use a narrower set of charges. |
| Funds delivered | The net amount you receive after any payments or deductions are made on your behalf. |
| Total of payments | The full scheduled repayment of more than just the amount of one installment. |
Compare offers with equivalent amounts and terms. List the price for each add-on and say whether you could turn it down. Generally, a charge that is included in the finance charge or scheduled payments should not be duplicated in determining the total cost. The cost of credit is made up of several elements beyond the stated interest rate.
Confirm the lender before submitting a request
Look up a nonbank consumer installment lender's legal name on the Illinois financial-institution license lookup. Look up the Consumer Installment Lenders category and review the information for the location given in the loan offer. If a company is claiming an exemption, find out what regulatory or legal authority protects that exemption.
A website accepting your details may be a loan matching service. A separate company may be the creditor. Find out what companies may receive your information and what credit inquiry you are authorizing. The lender may request your identity, income, employment, or account records. The lender's decision to approve or deny your loan application may be based on its requirements and applicable laws.
Submitting a request does not mean it will be approved, funded, or at a specific amount or rate. You need to review the actual creditor's offer before agreeing to repay it.
Use the payment schedule to assess the full commitment
Be certain that the first payment date, payment frequency, and last payment due date work with your paydays. Generally, payments made biweekly will be greater in number than payments made twice monthly. The loan agreement should state terms governing returned or late payments. Default provisions and the means of computing payoff amounts should also be stated. If interest is computed in advance, find out how unearned charges are dealt with upon prepayment.
Identify the property used as collateral for a secured loan, and what the lender can do if you default. Meeting the rate cap doesn't remove the risk to collateral. If payments would leave you with too little to pay rent, utilities, food, or transport, contact the biller to ask about a payment arrangement. You could also consider other ways to cover the expense before taking on the loan.