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Payday Loans

Which States Are Payday Loans Legal And Offered?

By November 26, 2021June 29th, 2022No Comments
state with legal payday loans

Legal Status of Payday Loans by USA State

Payday loans have been legalized in 37 states, but they are illegal in 13 states. California, Texas, and Nevada are the top states for payday loans.

The interest rates on payday loans have been set by four states: Colorado, Montana, and New Hampshire.

Are payday loans expensive?

Payday loans allow Americans to quickly get cash when they need it. Although they can be extremely helpful in financial emergencies, lenders have been accused of being unfair to borrowers. 
Payday loans and similar loans are illegal in some states. We have compiled some information about the laws governing payday loans in the USA.

Is it legal to get payday loans in my state

Payday lending laws vary from one state to the next. It all depends on how each consumer protection agency handles high-risk borrowing.
This guide will provide information on state payday lending regulations.

What States are Payday Loans Legal in?

Legal
Payday lending is legalized in 37 states, including Alabama, Colorado and California.
Illegal
Payday lending is currently prohibited in Arizona, Arkansas and Connecticut.
high-cost payday loans are allowed by some state laws. The protection of high-cost payday loans is provided for by fifteen states. There are reasonable loan rate caps and other prohibitions. 
For less costly loans, three states have lower rate caps and longer terms. Online payday lenders are subject to state licensing laws and rate caps in the state where the borrower is receiving the loan.

Payday loans in the USA

Payday loan interest rates have been limited in four states. The annual interest rate cap for Colorado, Montana and New Hampshire is 36%. There are no additional fees.

Federal law also stipulates that payday loans are subject to a 36% cap for military personnel.

What is the future of payday loans in the USA

In recent years, more states have taken steps to increase or pass legislation governing payday lending. As of 2020, there are 21 states with pending legislation regarding payday lending and other payday lending options.
Puerto Rico also has new payday loan laws in progress. The inauguration of November saw Nebraskans vote to increase the cap on payday loans. Utah‘s legislation dealt with reporting and registration requirements as well as operational requirements.
Virginia is among the states that have passed tighter legislation regarding payday loans. Virginia’s enactment has replaced payday loans by the term “short term loans”. This action also set a cap on the annual interest and fees for short-term loans at 36% plus a maintenance fee. The maximum loan value was increased from $500 to $2,500. It also established a minimum term of four months with exceptions and a maximum duration of 24 months.

How do I find out if a payday lender in my state is licensed?

Check to see if the lender holds a license issued by the state. The license should be visible in two ways: as a physical copy at your storefront or as an image on the website for payday loans. Ask the lender if you are unable to see the license.
You can check the license with your state attorney or financial regulation office if you’re still not sure.

What to watch out for

Payday loans that are illegally advertised should be a red flag. Unfortunately, there are still predatory lenders who will offer unlicensed and illegal payday loans. By imposing fees and interest rates that are much higher than the legal limit, they often trap borrowers in a vicious cycle of debt.
For more information about how to proceed if you believe you have fallen for a payday loan fraud, please contact your state attorney general and the police.

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Frequently Ask Questions

A payday loan (sometimes referred to as a cash advance or a payday advance) is a small loan borrowed for a brief period of time, often until the borrower's next payday. These short-term loans feature high interest rates and need no collateral (unsecured loans). It is not advised to use payday loans for an extended period of time. The rates and terms of payday loans vary by state.

A title loan (sometimes referred to as a title pawn or a car title loan) is a short-term loan where the vehicle title serves as collateral. Due to the fact that lenders of title loans do not verify borrowers' credit histories, these loans are popular among those with poor credit. Typically, title loans are taken out by borrowers who need cash quickly or have financial issues.

Unsecured loans, such as payday loans or installment loans, are supported solely by the borrower's creditworthiness, as opposed to secured loans, which need collateral. Secured personal loans include car title loans and pawn loans, for example.

State rules determine the maximum amount you can borrow as a short-term loan. In certain states, short-term loans (also known as payday loans) are prohibited, while in others they are permitted with a maximum loan amount. Visit our rates and terms page to get state-specific lending conditions. In addition to state legislation, additional factors may alter the conditions of your loan.

A personal loan that is repaid over time with a predetermined number of periodic payments or installments is known as an installment loan. Due to the lower APR, installment loans can be taken out over a longer term than payday loans. Installment loans are commonly seen as a preferable alternative to payday loans. Typically, installment loans are repaid in predetermined amounts that include both principal and interest.

The Annual Percentage Rate, or APR, is an annualized version of your interest rate. When picking between several types of loans, the APR assists in comparing the costs of each. The annual percentage rate (APR) for a loan may include costs, such as origination fees. Remember that while APR is essential, it is only one of several elements to consider when selecting a loan.

Yes. Your credit score is not the only criteria taken into account when analyzing your loan application. However, a low credit score can result in higher interest rates and fewer lending possibilities. A title loan is a popular option for consumers with poor credit because title loan lenders do not consider credit history.

Credit score ranges differ depending on the credit scoring algorithm employed and the credit bureau that generates the score. According to FICO, a credit score between 300 to 579 is poor or very poor. A satisfactory credit score ranges from 580 to 670. Credit scores are determined differently depending on the credit scoring model's parameters, such as payment history, amounts owing, length of credit history, etc.