Payday Loans in Arkansas: Laws, Limits and Safer Alternatives

Payday loans are not legal in Arkansas. A traditional or typical payday loan is a short-term loan to help you until your next paycheck, but these are usually low-dollar, high-cost loans with triple-digit annual percentage rates (APRs), making them difficult to repay, and often more expensive than anticipated. Consumers in Arkansas are well protected against this type of predatory lending.

If you’re in a bind and need cash, Arkansas has other loan options, including personal loans and cash advance apps. This guide will help you decide the right fit.

MoneyLion offers a service to help you find personal loan offers. Based on the information you provide, you can get matched with offers for up to $100,000 from our top providers. You can compare rates, terms, and fees from different lenders and choose the best offer for you.

Payday Loans in Arkansas: At a Glance

• Legal status: Payday loans have been illegal in Arkansas since 2008.

• Interest rate cap: State law caps interest rates at 17%, which effectively prohibits high-cost payday loans that typically carry triple-digit APRs.

• Loan amounts: There is no state-sanctioned maximum since payday loans are not allowed.

• Repayment terms: Lenders are not authorized to debit your bank account for payday loans.

• Alternatives: You can opt for installment loans, credit union loans, personal loans or hardship assistance.

How Payday Loans Work

Payday loans in Arkansas are illegal, but online lenders may still target consumers. If you see these kinds of terms, the lender may be offering an illegal loan. It’s also important to understand what you need for a payday loan, as these requirements are often minimal compared to safer alternatives.

• Application: You usually apply and provide proof of income. The lender may not check whether you can afford to repay the loan.

• Repayment term: The loan is typically due in two weeks, on your next payday.

• Interest rate: The APRs are usually 400% or more.

• Authorization: You may be required to authorize the lender to withdraw funds from your bank account.

• Rollover: Borrowers may be encouraged to pay what they can and roll over the remaining balance into a new loan.

• Debt cycle: Under Arkansas law, payday loans are void. However, if you’ve authorized withdrawals, a lender may still attempt to debit your account, which could result in multiple NSF fees.

Payday Loan Costs in Arkansas

• Illegal lenders may charge triple-digit APRs of 300% to 500%.

• They may also charge a fee of $15 to $30 for every $100 borrowed.

Here’s a quick example: If you take out a $300 loan, you could face a $45 fee, with an APR close to 391%.

Why State Caps Make This Unlawful

Payday loans are illegal because they exceed the state’s 17% interest rate cap. To make a profit, payday lenders must charge exorbitant interest. Under Arkansas law, these loans are considered void due to those excessive rates, meaning lenders may not have a legal right to collect the principal or interest.

Risks of Using Illegal Payday Lenders in Arkansas

While these loans can provide quick access to cash, they also come with several risks borrowers should understand.

• Unenforceable debt: The interest cap is 17%, but illegal lenders will try to collect more, despite the law.

• Rollover provisions: Because there are rollover provisions, the debt will likely compound.

• Bank account vulnerability: Since you’ve authorized the lender to take money out of your checking account, they will make unauthorized withdrawals.

• Risk of identity theft: Many of these payday lenders do not have protection for your data.

Safer Alternatives to Payday Loans in Arkansas

Before getting a payday loan, it’s worth comparing other borrowing options that may come with lower costs and fewer risks.

Cash Advance Apps

There are many types of cash advance apps. One, for example, is Instacash® from MoneyLion. This app lets users access small amounts of money when they need cash. Like other similar apps, it can be used whenever short-term funds are needed.

• Limit range: $25 to $100, depending on eligibility

• Cost structure: Many cash advances are interest-free, but there are optional tips and transfer fees if you need the funds within minutes.

• Credit impact: Typically, no credit check

• Repayment timing: Repayment is taken from your next paycheck.

Credit Builder Loans

A credit builder loan can help you build your credit while allowing you to save or access a portion of the funds. For example, Credit Builder loans from MoneyLion give CB Plus members access to credit-building tools designed to strengthen their credit as they make on-time payments.

• Loan amount range: Up to $1,000

• Cost structure: Fixed monthly payments over 12 months

• Credit impact: Paying consistently on time can help boost your credit score.

• Repayment term: The borrowed funds will be kept in a savings account while you make monthly payments. Once the loan is repaid, the funds are released to you.

Credit Union Small-Dollar Loans

You can find an alternative to payday loans if you’re a member of a credit union. These loans have lower interest and offer consumer protections that payday loans don’t always provide.

• Loan amount range: Up to $2,000

• APR cap: Up to 18%

• Credit requirements: You’ll need to be a member of a credit union, provide proof of income and have an account in good standing. You don’t need excellent credit to apply.

• Repayment term: One to twelve months 

Rental Assistance

If you’re having trouble paying rent, rental assistance programs may offer short-term relief.

• Who offers it: The Community Action Agencies and the Low-Income Home Energy Assistance Program

• Cost: None

• Qualification: Based on household size and income — usually at or below 150% to 200% of the federal poverty level

How To Choose the Right Option

If you need access to funds fast, here’s how to choose the right option in Arkansas:

Key Takeaways

• Payday loans are illegal in Arkansas.

• Arkansas is among the states with the strongest protections against predatory lending.

• There’s a 17% APR cap on loans in Arkansas.

• Consumers have several alternatives to payday loans, such as cash advance apps, credit builder loans and more.

Arkansas Payday Loans FAQs

Here are answers to common questions about payday loans in Arkansas.

Are payday loans legal in Arkansas?

No, payday loans aren’t legal in Arkansas.  

What is the maximum interest rate in Arkansas?

The maximum interest rate is 17%.

What happens if I use an online payday lender?

Your debt is likely unenforceable since it is void. The lender doesn’t have the right to collect the debt.

Can I report an illegal lender?

You can report an illegal lender. You can do so by visiting GotYourBackArkansas.org or calling the Consumer Protection Division at 800-482-8982.

What’s the fastest legal way to get cash in Arkansas?

You can use cash advance apps, credit union loans and employer advances.

Sources

Daphnet. "Payday Lenders in Arkansas."