Ohio Usury Laws
Ohio has established a usury cap on personal loans in that state at 21%. This usury cap applies to personal loans that are made in Ohio and involve an individual that is borrowing the money in question.
In Ohio, if a personal loan agreement that contains an interest rate above the 21% level is brought before a court in that state, the agreement will be declared illegal. The net effect of such a judicial declaration is that the loan agreement will be voided. Once voided by the court, it no longer is enforceable. In other words, the borrower will no longer be obliged to make payments pursuant to the loan agreement. The borrower is off the proverbial hook.
In some states, such an agreement would be deemed voidable -- in other words, the court could determine an agreement with an interest rate over the usury cap as unenforceable or enforceable with an interest rate modification at the discretion of the court. Again, in Ohio, in part because the interest rate cap is high, personal loans with interest rates above the 21% level are declared illegal and void in their entirety.
When it comes to other types of financing arrangements in Ohio, there are different statutory provisions that do come into play. For example, if an individual is purchasing some type of product that involves a financing arrangement, the Uniform Commercial Code as in effect in Ohio will govern the terms and condition of that financing agreement, including the applicable interest rate.
The various statutory provisions that are in force in Ohio today that govern usury, lending practices and related issues can be found codified in the Ohio Revised Code at Titles XI and XIII.
There are also separate statutory schemes that have been established to govern the interest rates that are charged by state chartered financial institutions that include banks as well as savings and loan associations and credit unions that are doing business in Ohio today. These institutions tend to have a greater degree of flexibility when it comes to loans, lending practices and usury caps.
Keep in mind that this article has been prepared for informational purposes. It is not intended as a vehicle for providing legal advice. Moreover, while we do take all necessary steps to keep the material and information contained in this article current, the laws of the State of Ohio can and do change from time to time.