Massachusetts borrowers can compare terms from banks, credit unions, and other authorized nonbank lenders. Protections under Massachusetts' small loan licensing threshold and rate order apply to small personal loans. The lender's status and the cash you actually receive determine which rules will apply.
The $6,000 small-loan threshold
Chapter 140, section 96, of the Massachusetts General Laws generally requires a small loan license when a business lends up to $6,000 primarily for personal, family, or household use and interest plus expenses exceed the equivalent of 12% a year.
Paid assistance with arranging or obtaining such loans can also require licensing. Certain education loans made by qualifying Massachusetts educational institutions, the Commonwealth, or its agencies are excluded.
The small loan statute examines the loan agreement as a whole and not just the amount at the top. If subtractions or payments that are made substantially at the time of the loan result in the borrower having $6,000 or less, then the small loan statute may be implicated even if the face amount of the loan is higher than $6,000.
Hypothetical example of amount: A loan showing an amount of $6,200 with a $250 charge deducted at origination showing an amount of $5,950. Comparing only the $6,200 label would miss the net-amount rule of the statute. This example identifies the threshold; it does not show that the charge or proposed loan is lawful.
Rates and charges for covered small loans
The Small Loan Rate Order, 209 CMR 26.01, enables certain lenders to charge up to 23% a year on unpaid balances, calculated by the actuarial method, and a $20 administrative fee when the loan is made. That administrative fee can not be charged to the same borrower more than once in any 12-month period.
The 23% figure describes the order's interest charge, and the permitted administrative fee is stated separately. We do not represent that every offer will be issued at 23%, and it should not be construed as a fee-inclusive APR ceiling for every Massachusetts loan. Larger loans and lending by entities operating under other authority require a review of the applicable law.
It prescribes treatment of certain loans with precomputed interest. For such loans, it requires the refund or credit when the loan is prepaid in full before the final installment date. Its default charge rule provides that no more than the lesser of 5% of the installment or $5 be charged when a scheduled installment remains unpaid in full for more than 10 days, and limits repeat charges for the same default.
Confirm lender authorization before sharing information
The Division of Banks' license lookup resources route consumers to NMLS Consumer Access to retrieve information on small loan companies. Search for the legal company name or license number, check the Massachusetts license category, and see if the license is current. If an entity states that it is exempt from the small loan company license or lending under a bank's authority, contact the Division to determine what verification applies to that situation.
The brand name of a website may differ from the creditor named in the contract. SlickCashLoan is a request and matching service, and is not the lender, and does not make approval decisions or set terms of the loan. Review who may receive your request information, and verify the company, if any, that makes the offer. Availability for Massachusetts residents does not mean that a specific applicant qualifies.
Compare offers using the amount you need
For everyday personal expenses, choose offers that provide enough cash to cover that expense. Unsecured loans do not pledge collateral. Secured loans do, and in the process, put the collateral at risk, such as a vehicle, after a default. Just looking at the repayment schedule will not show this.
When analyzing a loan, it is important to look at the interest rate as well as the cost of credit. The APR is an expression of the borrowing cost as an annual rate. The finance charge and the total of payments, however, are dollar amounts. Look over required fees and optional products, and consider the net funds delivered when choosing a loan offer. Don't just go with the loan offer that has the lowest monthly payment.
This calculator estimates equal monthly principal and interest payments for a fixed-rate amortizing loan. It does not include fees. Compare its estimate to the written payment schedule and include any charges withheld from the loan proceeds when judging the cash available for your expense.
A longer term can lower each payment while increasing total interest when other terms are the same. Test the full schedule against take-home income after essential bills and existing debt. For an expense with a biller, also ask whether a direct payment arrangement would cost less.
Check early payoff and any change to the schedule
Make sure to check whether interest is calculated on the declining balance or if it's calculated in advance. It's important to be aware of this because of how early payments are calculated. You will need to request a payoff quote for the desired date. You must also understand any required refunds or credits. The sum of all the remaining payments is not always the early payoff amount.
Review the terms regarding late charges, allocation of extra payments, and any provisions relating to deferment in the loan agreement. A lender may be willing to allow a change in payment, but a request for relief does not change the due date by itself. Keep a copy of any approval to change a payment and the effect of the change on the balance.
Information a lender may request
A lender may request identification, your Massachusetts residence info, income records, and/or records related to your accounts. Within the parameters of the law, lenders decide their own documentation and underwriting requirements. Irregular income does not establish approval or ineligibility. You can ask which records the provider accepts and compare the proposed payments to lower-income months.
Be sure to inquire about the type of credit check (hard or soft) and when it occurs before authorizing it. Prequalification is an initial assessment and not a final commitment. If the amount, rate, or fees change by the lender after review of final documents, assess those documents again before accepting.