Payday loans are legal in 37 US states. The most popular states for payday loans are California, Texas and Nevada. Other locations include Alabama, Colorado and Ohio payday loans to name a few.

Payday loans offer a fast and easy way to get extra money before your payday. They can be extremely beneficial if you encounter a financial emergency or incur unexpected expenses. Currently, there are over 20,000 stores where you can physically apply and receive funds on the same day, and there is also the option to apply for a payday loan online.

Payday lenders have increasingly come under scrutiny in the media for carrying high-interest rates. As a result, payday loans are currently illegal in 13 states through rules and regulations that have forbidden lenders from offering fast cash. States that forbid payday loans include Georgia, New York, and West Virginia. 

Other states, such as Colorado, Montana, and South Dakota, have set caps on payday loan interest rates to prevent their residents from being exploited, with key legislations 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 loans offer a useful type of short-term finance for customers who need money but cannot wait to pay an urgent expense until they receive their next paycheck. The cash advance intends to help tide someone over until the end of the month, with the intention that they will pay it back as soon as possible. Common reasons to use payday loans include needing to pay for emergency costs such as medical bills, dental fees, rent, funeral costs, car repairs or house renovations.

Private companies offer payday loans, lenders, startups and apps, they are not typically from banks. Bad credit loans are usually available too. 

Payday loans typically last between 2 weeks to 1 month, with the entire loan and interest usually repaid in full on the borrower’s next pay date. There is also normally the option to repay back your loan early – it is just important to check the terms and conditions of your loan agreement and to get in touch with the lender to arrange doing so.

Since payday loans are often criticized for carrying rates ranging from 300% to 600% APR, to make the price easy to compare to other financial products, the interest rate is multiplied as though it was an annual product, which makes it seem a lot higher even though it just lasts for a few days or a couple of weeks.

In Which US States Are Payday Loans Legal?

There are currently 37 US states that authorize payday lending, meaning getting a payday loan is legal. The states are:

  • Alabama
  • Alaska
  • California
  • Colorado 
  • Delaware
  • District of Columbia
  • Florida
  • Hawaii
  • Idaho
  • Illinois
  • Indiana
  • Iowa
  • Kansas
  • Kentucky
  • Louisiana
  • Maine
  • Michigan
  • Minnesota
  • Mississippi
  • Missouri
  • Montana
  • Nebraska
  • Nevada
  • New Hampshire
  • North Dakota
  • Ohio
  • Oklahoma
  • Oregon
  • Rhode Island
  • South Carolina
  • South Dakota
  • Tennessee
  • Texas
  • Utah
  • Virginia
  • Washington
  • Wisconsin
  • Wyoming

What Types of Payday Loan Regulations Exist? 

Every state has its own laws surrounding payday lending. For instance, the maximum loan amount that can be borrowed at one time is $300 in California, $500 in states such as Alabama, Alaska, Missouri and New Hampshire, $1000 in Delaware and $50,000 in Oregon.

Likewise, there is often a maximum loan term. For instance, money cannot be borrowed for longer than 13 days in Alaska, 31 days in Iowa, 32 days in Hawaii and 60 days in Kentucky. Minimum loan terms also exist in states such as Alabama of no less than 10 days and no less than 14 days in Indiana.

Payday loan interest rates caps have also been set in states such as Colorado, Montana, New Hampshire and South Dakota. In these states, the annual interest rate limit on payday loans is 36%, and any additional fees have been banned. In addition to this, federal law also dictates that fees are capped at 36% for all military members, regardless of their state.

In Which US States Are Payday Loans Illegal?

There are currently 13 US states which prohibit payday lending, 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 check whether a payday lender is legally licensed before taking out a payday loan, check if the lender or online payday loans companies has a state-issued license. Licenses should be visible either at the store-front or on the website, and if you are unable to find it, ask to see it. If you still have doubts, you can verify the license with your financial regulations office or state attorney.

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