Personal Loans in Kentucky: What Licensed Lenders May Charge

How the Kentucky rate brackets work

KRS 286.4-530 does not split one loan into slices. The whole loan takes the rate of the bracket its original principal falls into, not counting charges. Senate Bill 165, which became law in March 2023, raised the middle bracket from 2% to 2.42% a month. A licensee may lend up to $15,000, not counting charges.

Under KRS 286.4-533, the lender may also charge a loan processing fee of 5% of the original principal, up to $150, and only once on a loan in any 90-day period. Because the fee is a finance charge, the APR on your Truth in Lending disclosure will be higher than the monthly rate times 12, most of all on a small loan.

How Kentucky compares with its neighbors

On the National Consumer Law Center's comparison of a $2,000 two-year loan, Ohio caps the loan at about 31% APR, West Virginia at about 33% and Indiana at about 40%, while Tennessee allows about 49% and Virginia about 50%. Kentucky sits in the upper middle at about 42%. The state rules map shows every state side by side.

Who needs a license and who does not

The rates above are available only to a licensee under Subtitle 4 of KRS Chapter 286, the consumer loan company law. The Department of Financial Institutions, part of the Public Protection Cabinet, issues these licenses and lists licensees in its online search.

• Banks and credit unions answer to separate charters and regulators, and a bank may charge the rates its home state allows.
• Online lenders that partner with a bank may make loans through that bank, which can put the loan outside the Kentucky brackets. Ask who the lender of record is.
• Payday and title loans follow separate rules. Our sister site Lendmira covers them on its Kentucky lending laws page.

Late charges, returned payments and prepaying

• Late charge: if at least half of an installment is unpaid more than seven days after the due date, the lender may charge up to 2 cents per dollar of the installment for each full month it stays unpaid. As an alternative, it may charge 5% of the installment or $15, whichever is greater, once per installment.
• Returned payment: up to $25, or the amount another institution or processor passes on, if that is greater.
• Prepaying: of the processing fee, up to $75 is nonrefundable; any part above $75 is refunded under the prepayment rules in KRS 286.4-530 if you pay the loan off early.

A licensed lender may also charge $3 if you ask for the loan funds in a form other than a check. If a lender asks for any fee before it will approve or fund a loan, treat that as a warning sign; how to verify a lender explains what to check.

Check a lender and file a complaint

1. 1 Look up the license in the Department of Financial Institutions' licensee search, or on NMLS Consumer Access, before you apply.
2. 2 Keep the loan papers: the Truth in Lending disclosure, the agreement and any messages about fees.
3. 3 File a complaint with the Department of Financial Institutions through the electronic complaint form linked from its complaint page.
4. 4 Send a complaint to the CFPB as well if the lender is a bank or a bank partner, or if you are unsure who regulates it.

Questions people ask