The 12% Usury Cap
Connecticut's small loan and usury statutes cap interest at 12% APR on consumer loans — a rate that makes the traditional payday-loan pricing model, which typically annualizes into the hundreds of percent, financially unworkable for any licensed lender in the state.
No Wage Assignment as Security
Connecticut law separately bans using a wage assignment — a borrower's agreement to have loan payments deducted directly from their paycheck — as security for a loan. This closes off a mechanism some payday-style lenders use elsewhere to guarantee repayment, adding another layer against the product taking hold in the state.
Licensing Requirements Add a Third Layer
Any consumer lender operating in Connecticut also has to meet the state's licensing requirements, which effectively rules out short-term, high-fee lenders trying to operate at scale. Between the rate cap, the wage-assignment ban, and licensing, Connecticut has stayed a state where payday loans simply aren't offered as a legal product.
| Factor | Connecticut Rule |
|---|---|
| Usury cap | 12% APR |
| Wage assignment as security | Prohibited |
| Traditional payday loans | Effectively illegal |
| Licensing required | Yes, for all consumer lenders |
Since payday loans don't have a legal path in Connecticut, comparing licensed personal-loan offers priced within the 12% cap is the realistic starting point for short-term credit needs.
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