Payday loans are a short-term borrowing option where the lender will lend high-interest credit based upon your income. The principal of a payday loan is usually a portion your next paycheck. Payday loans have high interest rates, especially for short-term credit. They are also called “cash advance” loans or “check advance” loans.
KEY TAKEAWAYS
Payday loans are short-term loans with very high interest rates that consumers can get.
The amount you earn is usually the basis for payday loans. You will need to submit a pay slip when you apply.
Over the years, a number of laws were passed to regulate high interest rates and fees associated with payday loans.
Understanding Payday loans
Payday loans are a type of unsecured personal loan. They do not require collateral and charge high interest rates to borrowers. These loans may be considered predatory lending, as they have extremely high interest, don’t consider a borrower’s ability to repay, and have hidden provisions that charge borrowers added fees.They can lead to consumers falling into debt. You might want to consider a payday loan before you make a decision. Alternatives to safer personal privacy.
Applying for a Payday loan
Payday loan providers typically have small credit merchants that offer credit approval and allow customers to apply for loans in person. Online lenders may also offer some payday loan services.
To complete a payday loan application, you must provide pay stubs from your employer that show your current level of income. The loan principle is often based on the borrower’s expected short-term income. A lot of lenders also take a borrower’s wages as collateral. Lenders don’t usually conduct credit checks or assess your ability to repay the loan.
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Payday lenders can charge interest rates as high as 780% per year (APR), while the average loan is nearly 400%. 64 Most states have usury legislation that limits interest charges to between 5% and 30%. However, payday lenders are exempt from these laws. These loans are eligible for state lending loopholes. Borrowers should be aware. These loans are governed individually by each state. 13 states (Arizona Arkansas, Connecticut Georgia, Maryland Massachusetts, New Jersey New Mexico, New York State, North Carolina, Pennsylvania Vermont, West Virginia, West Virginia, West Virginia, West Virginia, and West Virginia) have regulations.
California’s payday lenders can charge a 14 day APR of 459% to $100 for a $100 loan. These loans can also be subject to finance charges, which average $15 per $100.
Although the federal Truth in Lending Act requires payday lenders to disclose their finance charges, many people overlook the costs. The majority of loans are for 30 or less days and can be used to pay short-term obligations. These loans typically range from $100 to $1,000 with $500 the most common. Many borrowers end up being repeat customers, with as high as 80% of them being able to roll over the loans for additional finance charges.
Payday loans can provide cash in a hurry that will help you get the next paycheck. These loans can lead to debt traps for borrowers due to their high interest rates and fees.
State
Finance charges
Maximum loan amount
Loan term
Alabama
No more than 17.5%
$500
10 to 31 days
Alaska
An origination fee of $5. Finance charge that doesn’t exceed $15 or less for every $100 advanced, or 15% of the total advance, whichever is less.
$500
Minimum 14 days
Arizona
Payday loans are not legal in this state.
Arkansas
Payday loans are not legal in this state.
California
15% of the face value of the check
$300
Colorado
Not to exceed 20% of the first $300 and an additional 7.5% for any amount in excess of that balance.
$500
Minimum of 6 months
Connecticut
Payday loans are not legal in this state.
Delaware
No limit
$1,000
Less than 60 days
Florida
Fees can’t exceed 10%.
$500 for the face value of the check
7 to 31 days
Payday loans are not legal in this state.
Hawaii
Fees can’t exceed 15% of the face value of the check
$600
No restrictions
Idaho
No restrictions on fees
25% of the borrower’s gross monthly income or $1,000, whichever is less
Maximum of 37 months for loans over $300 Maximum of 25 months for loans less than $300
Illinois
No more than $15.50 for every $100 borrowed
$1,000 or 25% of the borrower’s gross monthly income
Minimum of 13 days
Indiana
No more than 15% for less than $250; 13% for $250 to $400; 10% for $400 to $605
$605
Minimum of 14 days
Iowa
No more than $15 on the first $100 borrowed and $10 for each subsequent $100 borrowed
$500
Maximum of 31 days
Kansas
No more than 15%
$500
7 to 30 days
Kentucky
No more than $15 per $100 borrowed
$500
Maximum of 60 days
Louisiana
No more than 16.75%
$350
Maximum of 30 days
Maine
$5 for loans less than $75; $15 for loans between $76 and $249; $25 for loans more than $250 or more
$4,000
No restrictions
Maryland
The state allows small loans subject to interest rate caps, which depend on the amount borrowed.
Massachusetts
Small loans aren’t prohibited, but loans referred to as “payday loans” are. Small loans are capped at 23% and $6,000 or less.
Michigan
No more than 15% for first $100 borrowed; 14% for second $100 borrowed; 13% for third $100 borrowed; 12% for fourth $100 borrowed; and 11% for fifth $100 borrowed
$600
Maximum of 31 days
Minnesota
No more than $5.50 for loans less than $50; $5 fee + 10% for loans between $50 and $100; 7% (minimum of $10) plus $5 fee for loans between $101 and $250; 6% (minimum of $17.50) plus $5 fee for loans more than $250
$350
Maximum of 30 days
Mississippi
No more than $20 per $100 for loans less than $250; no more than $21.95 for loans between $250 and $500
$500
30 days
Missouri
75%
$500
14 to 31 days
Montana
No more than 36%
$300
Maximum of 31 days
Nebraska
Maximum of $15 per $100 borrowed
$500
Maximum of 34 days
Nevada
No restrictions
25% of expected gross monthly income
35 days
New Hampshire
No more than 36%
$500
7 to 30 days
New Jersey
Payday loans are not legal in this state.
New Mexico
While payday loans are not legal in this state, be careful when looking at your small loan options. New Mexico allows lenders to charge interest of up to 175% on small loans.
New York
Payday loans are not legal in this state.
Payday loans are not legal in this state.
North Dakota
No more than 20%
$500
Maximum of 60 days (including any renewal)
Ohio
Interest is capped at 28%. But for loans less than 90 days, the monthly payment (including fees) can’t exceed 6% of the borrower’s gross monthly income or 7% of net monthly income. For loans greater than 90 days but less than one year, fees and interest can’t exceed 60% of the initial loan amount.
$1,000
Up to one year
Oklahoma
$15 for loans every $100 up to $300; $10 for every additional $100
$500
12 to 45 days
Oregon
36% (excluding origination fee of $10 per $100 borrowed or $30, whichever is less)
$50,000
31 to 60 days
Payday loans are not legal in this state.
Rhode Island
No more than 10%
$500
Minimum of 13 days
South Dakota
No more than 36% (including all fees)
$500
No restrictions
South Carolina
No more than 15% of the amount advanced
$550
Maximum of 31 days
Tennessee
No more than 15% of the amount advanced
$500
Maximum of 31 days
No restrictions
No restrictions
No restrictions
Utah
Lenders can’t charge interest for longer than 10 weeks after the initial date of the loan.
No restrictions
Maximum of 10 weeks
Vermont
Payday loans are not legal in this state.
Virginia
No more than 36% plus a monthly service fee
$2,000
Four to 24 months
Washington
15% for payday loans under $500; 10% for payday loans above $500 up to $700
$700 or 30% of gross monthly income, whichever is less
Maximum of 45 days
West Virginia
Payday loans are not legal in West Virginia, but small personal loans are. Personal loan lenders offering unsecured loans for $3,500 can’t charge more than 31% interest.
Wisconsin
The maximum rate is 2.75% if not paid in full; otherwise there are no restrictions
$1,500 (including fees and interest) or 35% of the borrower’s gross monthly income, whichever is less
Maximum of 90 days
Wyoming
No more than $30 or 20% per month on the principal balance
