Perhaps one of the hardest tasks for a debt collection agency to undertake is chasing around a debtor who is consistently in a cycle of debt. Short term loans are effective short term financing solutions that allow consumers to obtain a substantial sum of cash. These are ideal when a credit card is maxed or a bank won't allow further cash withdrawals and the consumer is in dire need of some extra money. Of course, a consumer should have the common sense to understand the responsibility that comes along with taking on a short term loan. A swift repayment is expected to be made, otherwise interest will pile on the debt. In Kentucky, it is illegal for a consumer to take out two short term loans at once. This effectively restricts the consumer from taking on more debt than they can handle. While this may prove as a restrictive law for debt collection agencies, it can help the ratio of paid to unpaid debts. Additionally, tacking on interest rates on short term loans is prohibited in the state of Kentucky. Only a one-time fee is assessed, according to Kentucky.com. In other states, for a collection agency that charges interest, the fiscal consequences of not paying in the allotted time as stipulated in the contract should be revealed early to the consumer to avoid any miscommunication later on. A short term lending agency ultimately has to work with the laws mandated by their state, but it has leeway in its approach toward the approval process. While a novice short term agency could technically accept nearly any consumer with a registered bank account and driver's license, one should properly run checks on a consumer's credit report before loaning money. If a consumer is proven to be unreliable based on their credit reports, or has had an extended period of unemployment, it may be irresponsible on the debt collector's part to offer a loan. You want to have a clientele with a history of employment and reputability as far as credit payments goes - doing so will increase the likelihood of paid debts and reduce the chances you'll have to chase around debtors via phone calls, letters and bad credit report claims.