Payday loans are legal in 37 US states. The most popular states for payday loans are California, Texas and Nevada. Other locations include Alabama, and Colorado Payday loans in Ohio to name a few.
Payday loans offer a quick and easy way to get extra money before your payday. They can be extremely beneficial when you face financial hardship or unexpected expenses. There are currently over 20,000 stores where you can physically apply for and receive money same day, and there is also the option to apply for a payday loan online.
Payday lenders have come under increasing scrutiny in the media for carrying high interest rates. As a result, payday loans are currently illegal in 13 states by rules and regulations that prohibit lenders from offering quick cash. States that ban payday loans include Georgia, New York, and West Virginia.
Other states such as Colorado, Montana and South Dakota have capped payday loan interest rates to prevent their residents from being exploited, and there are important laws in place to prevent predatory lending.
This article breaks down the states where payday loans are legal or illegal and the types of laws in the place where citizens can borrow money.
What are Payday Loans?
payday loan provide a useful form of short-term financing for clients who need cash but can’t wait until their next paycheck to pay for an urgent expense. The cash advance is designed to help bridge someone through to the end of the month with the intention of paying them back as soon as possible. Common reasons for using payday loans include the need to pay for emergency expenses such as medical bills, dentist fees, rent, funeral expenses, car repairs, or home renovations.
Private companies offer payday loans, lenders, startups and apps, they don’t usually come from banks. Loans with bad credit are usually available as well.
Payday loans typically last anywhere from 2 weeks to 1 month, with the entire loan and interest usually being paid back in full on the borrower’s next payment date. There is usually also an option to repay your loan early – it is just important to check the terms of your loan agreement and get in touch with the lender to arrange this.
Because payday loans are often criticized for bearing interest between 300% and 600% APRto be able to easily compare the price with other financial products, the interest rate is multiplied as if it were an annual product, making it appear much higher, even though it only lasts a few days or a few weeks.
In which US states are payday loans legal?
There are currently 37 US states that approve payday loans, meaning that receiving a payday loan is legal. The states are:
- District of Columbia
- New Hampshire
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
What Types of Payday Loan Provisions Are There?
Every state has its own laws surrounding payday loans. For example, the maximum loan amount that can be borrowed at one time is $300 in California, $500 in states like Alabama, Alaska, Missouri and New Hampshire, $1000 in Delaware and $50,000 in Oregon.
There is also often a maximum loan term. For example, money cannot be borrowed for more than 13 days in Alaska, 31 days in Iowa, 32 days in Hawaii, and 60 days in Kentucky. States like Alabama also have minimum terms of at least 10 days and Indiana at least 14 days.
States like Colorado, Montana, New Hampshire, and South Dakota have also set interest rate caps on payday loans. In these states, the annual interest rate limit for payday loans is 36%, and all additional fees have been banned. In addition, federal law requires that dues be capped at 36% for all military personnel regardless of their state.
In which US states are payday loans illegal?
There are currently 13 US states that prohibit payday loans, making it illegal to borrow money through a payday loan. These states are Arizona, Arkansas, Connecticut, District of Columbia, Georgia, Maryland, Massachusetts, New Jersey, New York, North Carolina, Pennsylvania, Vermont and West Virginia.
How can you tell if a payday lender is legally licensed in a US state?
To verify that a payday loan is legally licensed, before taking out a payday loan, check to see if the lender or online payday loan company has a government-issued license. Licenses should be visible either in store or on the website and if you can’t find them, ask for them. If in doubt, you can have the license checked by your tax office or public prosecutor.