If your checking account is empty and you need money until payday, a payday loan may seem like an easy solution. But payday loans are dangerous. They are so dangerous that they’re banned in many states — and heavily regulated in many others.
Table of Contents
States Where Payday Loans Are Illegal
States restrict payday lending by outlawing the product altogether or setting stringent interest rate caps or usury limits. Strict interest rate caps drive payday lenders out of the state and effectively end the practice.
3 States Have Specific Payday Loan Restrictions
- Connecticut has banned the assignment of wages to secure loans
- Georgia prohibits payday loans of less than $3,000
- West Virginia does not allow deferred presentment loans
12 States Cap Payday Loan Interest Rates at 36%
Arizona, Colorado, Hawaii, Illinois, Maryland, Minnesota (as of Jan. 1, 2024), Montana, Nebraska, New Hampshire, New Mexico, North Carolina and South Dakota cap interest rates at 36%.
6 States and Washington, D.C. Have Even Tighter Rate Caps
Arkansas, New Jersey, New York, Pennsylvania, Vermont, Massachusetts, and the District of Columbia have even lower rate caps.
READ MORE: How to get out of payday loan debt for good
Pro tip: Lenders affiliated with Native American tribes do not have to follow state laws. If you need a payday loan, check that you aren’t borrowing from a tribal lender. There are countless horror stories from borrowers who thought state laws regulated their loans, and instead, they ended up paying 1,000%+ APRs.
READ MORE: Payday loan organizations
Check out this map to see your state’s payday loan interest rates.
How Well Does Your State Protect Payday Loan Borrowers?
Here is a roundup of laws and interest rate caps in the remaining 29 states:
Alabama
- Rate cap: 456.25%
- Maximum loan amount: $500
- Term: 10-31 days
Alaska
- Rate cap: 520%
- Maximum loan amount: $500
- Term: Minimum 14 days
California
- Rate cap: 460%
- Maximum loan amount: $300
- Term: Max. 31 days
Delaware
- Rate cap: 391%
- Maximum loan amount: $500 per loan, $1,000 max per borrower at one time
- Term: Maximum 60 days
Florida
- Rate cap: 304%
- Maximum loan amount: $500
- Term: 7-31 days
Idaho
- Rate cap: 382%
- Maximum loan amount: $1,000
- Term: N/A
Update: Senate Bill 1285, a 2024 measure introducted by the Idaho state legislature, would impose new regulationson payday loan interest rates. If passed, the measure would cap payday loan interest rates at 36% of the principal loan amount.
Indiana
- Rate cap: 652%
- Maximum loan amount: $550 or 20% of gross monthly income
- Term: Minimum 14 days
Iowa
- Rate cap: 336%
- Maximum loan amount: $500
- Term: Maximum 31 days
Kansas
- Rate cap: 391%
- Maximum loan amount: $500
- Term: 7 to 30 days
Kentucky
- Rate cap: 469%
- Maximum loan amount: $500
- Term: 7 to 30 days
Louisiana
- Rate cap: 478%
- Maximum loan amount: $350
- Term: Maximum 30 days
Maine
- Rate cap: 217%
- Maximum loan amount: $2,000
- Term: N/A
Michigan
- Rate cap: 370%
- Maximum loan amount: $600
- Term: Maximum 31 days
Mississippi
- Rate cap: 521%
- Maximum loan amount: $500
- Term: Maximum of 30 days
Missouri
- Rate cap: 527%
- Maximum loan amount: $500
- Term: Maximum 31 days
Nevada
- Rate cap: 652%
- Maximum loan amount: 25% of expected gross monthly income
- Term: Maximum 35 days
North Dakota
- Rate cap: 526%
- Maximum loan amount: $500
- Term: Maximum 60 days
Ohio
- Rate cap: 138%
- Maximum loan amount: $1,000
- Term: Maximum 12 months
Oklahoma
- Rate cap: 203%
- Maximum loan amount: $1,500
- Term: Maximum 12 months
Oregon
- Rate cap: 154% per year
- Maximum loan amount: $50,000
- Term: Maximum 60 days
Rhode Island
- Rate cap: 261%
- Maximum loan amount: $500
- Term: Minimum 13 days
South Carolina
- Rate cap: 395%
- Maximum loan amount: $550
- Term: Maximum 31 days
Tennessee
- Rate cap: 460%
- Maximum loan amount: $500
- Term: Maximum 31 days
Texas
- Rate cap: 664%
- Maximum loan amount: N/A
- Term: Minimum seven days, maximum 180 days
Utah
- Rate cap: None; 652% APR on average
- Maximum loan amount: No limit
- Term: May not exceed ten weeks
Virginia
- Rate cap: 173%
- Maximum loan amount: $2,500
- Term: Maximum 24 months
Washington
- Rate cap: 391%
- Maximum loan amount: The lesser of $700 or 30% of gross monthly income
- Term: Maximum 45 days
Wisconsin
- Rate cap: 516%
- Maximum loan amount: The lesser of either $1,500 including fees or 35% of gross monthly income
- Term: 90 days or less
Wyoming
- Rate cap: 261%
- Maximum loan amount: Not specified
- Term: One calendar month
READ MORE: Payday loan requirements
Federal Laws
In addition to state laws, the Consumer Financial Protection Bureau (also has some regulations in place to protect borrowers. Learn more about those at cfpb.gov.
READ MORE: Payday loans vs. installment loans
Payday Loans and the Military Lending Act
Payday lenders must meet specific requirements for anyone on active duty or their dependents. These rules are federal law under the Military Lending Act (or MLA).
In the case of payday loans, the APR for servicemembers and their families is capped at 36%. Because of this, some payday lenders refuse to issue loans to military servicemembers.
READ MORE: Installment loans for military servicemembers and Veterans
Why Do States Restrict Payday Lending?
Payday loans are controversial. They are high-cost loans offered by lenders who target borrowers with poor credit scores and no other loan options. The high interest rates and quick repayment on the next payday make it very difficult for borrowers to repay the loans as scheduled. About 80% of payday loan users end up having to roll over the small loans, and soon the rollovers become a pattern, leaving borrowers stuck in what’s known as the payday loan debt trap.
READ MORE: Are online payday loans safe?
Payday lenders often trick borrowers by charging a fee instead of interest. This makes it seem as though the loans are lower-cost. However, because these are extremely short-term loans, a fee of $15 per $100 borrowed equates an annual percentage rate (APR) of close to 400%.
In addition, you may be charged finance charges if your payment is late or for payday loan renewals.
Payday loan storefronts are pervasive. There are as many brick-and-mortar payday loan stores as McDonald’s and Starbucks, and that doesn’t even factor in the online lenders.
How well does your state protect payday loan borrowers? Check out this research from The Pew Charitable Trusts.
READ MORE: Payday loan interest rates
Better Payday Loan Alternatives
- Payday Alternative Loans
- Credit card cash advances
- Cash advance apps
The Bottom Line
Many state legislatures have taken steps to protect payday loan borrowers, but that still doesn’t mean a lender won’t try to offer an illegal loan. Make sure to learn your state’s rules, read your loan’s terms and conditions and ensure that any lender you work with isn’t a tribal lender.
The best protection of all is not to use payday loans at all. Instead, look at Payday Alternative Loans or cash advance apps.