Payday Loans in Missouri: Are They Legal and How Do They Work?

If you're a Missouri resident facing a surprise car repair or a medical bill that won't wait until payday, a payday loan might seem like the best solution. Just be aware that Missouri has some of the loosest payday loan laws in the country, meaning you'll have fewer legal protections as a borrower.

Before you sign on the dotted line, it's important to understand how payday loans actually work in Missouri, what the law does (and doesn't) protect you from and what alternatives are available. 

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Are payday loans legal in Missouri?

Yes, payday loans are legal in Missouri, and the state's regulations are among the most lender-friendly in the nation. 

Unlike states like Montana or New York that have effectively shut down payday lending through strict annual percentage rate (APR) caps, Missouri still allows lenders to charge fees and interest that can translate to triple-digit APRs. 

For example, lenders typically charge around $15 to $25 per $100 borrowed, which puts the average payday loan APR in Missouri at approximately 444%.

Here's what you need to know about Missouri's key payday lending regulations:

• Maximum loan amount: $500

• Loan terms: 14 to 31 days

• Fee cap: Total interest and fees cannot exceed 75% of the initial principal over the life of the loan, plus all renewals

• Rollovers: Up to 6 renewals allowed

• Non-sufficient funds fee: Up to $25

• Late fee: 5% of the amount due after 15 days past the due date

• Licensing: Lenders must be licensed by the Missouri Division of Finance

• Criminal action: Lenders cannot pursue criminal charges against borrowers for non-repayment

• Cooling-off period: None required between loans

You can verify whether a lender is properly licensed by visiting the Missouri Division of Finance's licensee search tool. If you encounter issues with a payday lender, you can file a complaint through the Division's consumer complaint page.

How payday loans work in Missouri

Payday loans in Missouri follow the same basic structure as they do in most states, but with fewer guardrails for borrowers. Here's how the process typically works:

1. Apply for a payday loan: Be prepared to provide proof of income, a government-issued ID and an active bank account. Most payday lenders do not run a credit check, which makes them accessible to borrowers with poor or no credit history.

2. Receive your funds: Once approved, you can receive up to $500 in cash or have it deposited directly into your bank account. Many storefront and online lenders in Missouri offer same-day funding

3. Repay your loan: The lender collects repayment on your next payday, typically within 14 to 31 days.

4. Renewal of your loan: If you can't pay back the full amount, Missouri law lets you roll the loan up 6 times, as long as you pay down at least 5% of the principal each time. Since the lender charges a renewal fee with each rollover, the costs can spiral quickly.

Example costs: Missouri lenders commonly charge around $15 to $25 per $100 borrowed. On a $300 loan for 14 days, a fee of $17 per $100 would cost you $51 in interest, which equals an APR of roughly 443%.

The risks and dangers of payday loans

Missouri's permissive lending laws make payday loans particularly risky for borrowers. Here are the five biggest dangers to watch for.

1. Sky-high APRs: While other states have capped payday loan APRs at 36%, Missouri allows fees that translate to APRs above 400% on average. That makes Missouri one of the most expensive states in the country for payday borrowing. For context, credit card APRs range from 12% to 30%.

2. The loan rollover trap: Missouri allows up to 6 loan renewals. Since each one comes with a new fee, consistently rolling over your loans can make it easy to get buried underneath high-interest debt.

3. Bank account issues: When you authorize a payday lender to withdraw funds from your account, you risk overdrawing your balance on repayment day. This can trigger additional fees from your bank (overdraft fee) and your payday lender (non-sufficient funds fee).

4. Credit damage: Payday lenders generally don't report your payments to major credit bureaus, so on-time payments won't help build your credit score. But if you default and the debt goes to collections, it can remain on your credit report for up to seven years. 

5. Long statute of limitations: In Missouri, payday lenders have ten years to sue borrowers for unpaid debts. That's one of the longest windows in the country, which means a defaulted payday loan can follow you for a very long time.

When a payday loan might be the only option

Sometimes, after exhausting every alternative, a payday loan might feel like the only path forward. If you find yourself in that position in Missouri, here's how to minimize the damage:

• Only borrow what you absolutely need: Avoid the temptation to max out the $500 limit if you only need $200. The more money you borrow, the higher your interest costs will be.

• Have a clear repayment plan: Before signing, make sure you can pay the loan back in full by your next payday without falling short on rent, groceries or other essentials.

• Do your best to avoid loan rollovers: Missouri allows up to 6 renewals, but each one piles on additional fees. Ideally, you should be able to pay off your loan in full on the first due date.

• Verify that the lender is licensed: Check with the Missouri Division of Finance to confirm the lender is operating legally. Online lenders that aren't licensed in Missouri may not follow state regulations.

• Read the fine print: Missouri law caps total fees and interest at 75% of the principal, but lenders structure their fees differently. Make sure you understand the total cost before signing an official loan agreement.

Safer alternatives to payday loans

Before turning to a payday loan, consider these alternatives that typically come with lower costs and better terms.

Credit cards

Using a credit card for an emergency expense and paying it off quickly is usually far cheaper than a payday loan. If you need cash, then you can also explore a credit card cash advance. Cash advances carry higher interest rates than regular purchases, but they’re still lower when compared to payday loans.

Earned wage access

Earned wage access (EWA) lets you access a portion of wages that you've already earned before your scheduled payday. There’s an important difference here: EWA is not a loan. It’s a way to get paid for wages you’ve already earned. This means that there’s no interest or credit check involved.

For example, MoneyLion's Instacash lets you access up to $500 of your already-earned pay before payday, with no interest or mandatory fees. It will not affect your credit, and the balance is automatically deducted when your paycheck arrives, making it a much more manageable way to cover short-term cash needs without the risks of payday lending.

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Personal loans (banks or credit unions)

Personal loans from banks or credit unions typically come with significantly lower interest rates, longer repayment terms and higher loan amounts than payday loans. Borrowers with fair credit may get approved for loans that are more affordable than Missouri payday loans.

Payday alternative loans (PALs)

Payday Alternative Loans (PALs) are small-dollar loans offered by federal credit unions that are designed to help borrowers avoid predatory lenders. 

PALs are an attractive alternative to payday loans because their APRs and fees are often capped to keep them affordable.

Credit-builder loans

A credit-builder loan is designed to help you build or repair your credit over time. Instead of receiving the funds up front, you make regular payments and receive the loan proceeds after you've paid it off. 

Credit builder loans aren’t quick-cash solutions, but they can strengthen your credit profile so you have better options the next time you need funds. With a MoneyLion Credit Builder Plus paid membership, you get access to a credit-builder loan along with tools and insights to help manage your credit.

State-specific assistance programs

Missouri offers several assistance programs that can help residents get through financial rough patches without taking on high-cost debt:

• Supplemental Nutrition Assistance Program (SNAP): Provides monthly food benefits to eligible low-income Missourians. Most families with gross monthly income up to 130% of the federal poverty level may qualify.

• Temporary Assistance (TA): Provides monthly cash benefits to families in need to help cover expenses like clothing, utilities and other essentials. 

• Low-Income Home Energy Assistance Program (LIHEAP): Helps eligible households pay heating bills during the winter months (October through March). This can free up cash for other urgent needs.

You can apply for SNAP, TA and other Missouri assistance programs via an online application at mydss.mo.gov. 

Borrowing from family and friends

While it might not be your first choice, borrowing from someone you trust can save you hundreds of dollars in interest and fees. If you decide to go this route, consider treating it like any other financial agreement. Set clear repayment terms, stick to them, and put the agreement in writing if the amount is significant.

Side hustles

If your income isn't covering your expenses, a side hustle can help you earn extra cash without taking on any debt at all. The extra income can also help you build your emergency fund so you're less likely to need a payday loan in the future.

Getting a payday loan in Missouri

Payday loans are legal in Missouri, but the state's loose regulations make them among the most expensive and risky in the country. With APRs that can reach into the triple and even quadruple digits, plus up to six rollovers that pile on additional fees, it's easy for a small loan to become a serious financial burden. 

Before making a final decision, take the time to explore other alternatives that we discussed in this article. Options like earned wage access through Instacash, PALs from credit unions or state assistance programs can provide the financial relief you need without the risks that come with payday lending.

FAQs

What is the maximum loan amount I can borrow in Missouri?

Missouri law caps payday loans at $500. A lender or any affiliated entity cannot have more than $500 in loans outstanding to the same borrower at any one time.

What fees and interest rates can payday lenders charge in Missouri?

Missouri lenders can charge fees and interest totaling up to 75% of the original principal over the life of the loan and all renewals. In practice, most lenders charge around $15 to $25 per $100 borrowed, which translates to an average APR of roughly 444%.

How long do payday loans last?

In Missouri, payday loan terms range from 14 to 31 days. However, the law allows up to 6 renewals, meaning a single payday loan could stay active for several months if renewed repeatedly.

Will a payday loan affect my credit score?

Most payday lenders don't report to the major credit bureaus, so on-time payments typically won't help build your credit. However, if you default and the debt is sent to collections, that can negatively impact your credit score for up to seven years.

Can I get a payday loan with bad credit?

Yes. Payday lenders in Missouri generally don't check your credit score and instead base approval on proof of income and an active bank account. That accessibility is part of what makes payday loans appealing, but it also means lenders aren't evaluating whether you can realistically afford to pay the loan back.

Sources

• Debthammer.org – Ultimate Guide to Missouri Payday Loan Laws

• UStatesloas.org – Missouri Payday Loan Law and Legislation

• Finance.mo.gov - Missouri Division of Finance – Consumer Credit Licensing Payday Lending

• Finance.mo.gov - Missouri Division of Finance's licensee search tool

• ConsumerFinance.gov – What is a Payday Loan?

• ConsumerFinance.gov - Can taking out a payday loan help rebuild my credit or improve my credit score?

• Mycreditunion.gov – Payday Loan Alternatives

• Mydss.mo.gov - Supplemental Nutrition Assistance Program (SNAP)

• Mydss.mo.gov - Temporary Assistance (TA)

• Mydss.mo.gov - Low-Income Home Energy Assistance Program (LIHEAP)