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

Payday loans are legal in Florida, but the state has several regulations that lenders must follow. You can borrow up to $500 through a payday loan, and the maximum fee is 10% of the money borrowed plus a $5 verification fee.

The state also specifies that payday loan terms must be between 7 and 31 days, and borrowers are only allowed to have one outstanding loan open at any time. If you encounter a lender that doesn’t follow these guidelines, they’re probably unlicensed, and you should steer clear.

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How payday loans work in Florida

Legal payday loans in Florida meet the requirements mentioned above, including a maximum amount of $500 and a maximum fee of 10% of the principal. That doesn’t mean the interest rate is reasonable, though. If you take out a $100 payday loan with a 10% borrowing fee that needs to be repaid within 14 days, that equates to an effective APR of about 261%. Compare that to non-payday personal loans, which generally have APRs ranging from 6% and 36%.

When you take out a payday loan, the lender will usually require you to link your bank account so it can automatically withdraw its repayment when your paycheck hits. 

The risks and dangers of payday loans

Taking out a payday loan isn’t only expensive, but it can also be risky if you’re not able to pay the lender back in time. If you need to push back your repayment date, you’ll usually be charged a rollover fee, which is often the same amount you were charged to borrow money in the first place. The longer you take to pay back your loan, the more interest fees you’ll incur, and that’s on top of the loan principal you borrowed and need to pay back as well.

Payday loans can also pose a risk to your credit score if you’re not able to pay them back. If you don’t pay them back, lenders can eventually sell your debt to a collection agency. In that case, the collection agency will continue trying to reach you for repayment, and there will be a negative mark on your credit report that can stay for several years. This can result in damage to your credit score, which in turn can make it harder to get approved for future loans and new lines of credit.

How to avoid the payday loan trap

Payday lenders are able to charge such high interest rates because many consumers feel trapped, without any other options to borrow money when they need it urgently. You can take steps to avoid this predicament, such as building up an emergency fund to help cover any large expenses that come up. 

Working to improve your credit is another key strategy. If your credit is in the fair range, at a minimum, you’ll have a better chance of getting approved with a non-payday lender that charges lower interest rates. 

When a payday loan might be the only option

A payday loan is usually not the only option, but it can feel like that if you’re in a pinch and you don’t see any obvious alternatives. Make sure you explore all the alternatives discussed below to confirm that you truly don’t have any other options. 

If you aren’t able to get funds another way, such as through a payday advance or borrowing money from a trusted loved one, make sure you move forward with a payday loan with your eyes wide open. This means knowing exactly how much you’ll owe and when it’s due. You should also be sure that you’ll be able to repay the loan by the due date to avoid extra fees.

Safer alternatives to payday loans

The following payday loan alternatives are safer and more cost-efficient ways to borrow money. Depending on your situation, not every single option may be available to you, but it’s always worth checking.

Credit cards

Credit cards can effectively act as short-term loans, since you have a line of credit that you can use up to a certain limit. You could charge a large expense to your card and wait to pay it off until the balance is due. If you can’t repay the balance in full, though, you’ll be charged interest.  

Earned wage access

You could also use an earned wage access (EWA) product like MoneyLion’s Instacash as a payday loan alternative. With Instacash, you can get up to $500 of your already-earned wages before payday without paying interest or mandatory fees. Plus, EWA services aren’t loans, so they won’t affect your credit.

Personal loans (banks or credit unions)

A regular personal loan from a bank or credit union is virtually always a better option than a payday loan, since interest rates are much lower. Some banks, credit unions and online lenders have minimum credit score requirements for loans, and in some cases you can prequalify to see your rates and approval odds without impacting your credit.

Payday alternative loans (PALs)

Many credit unions offer payday alternative loans (PALs), which have interest rates capped at 28% APR and are usually for small sums of money.

Credit-builder loans

If a lower credit score is a barrier to you borrowing money with more reasonable interest rates, using a credit builder loan could be a good strategy. This type of loan isn’t a good option for getting cash fast, since you won’t have access to the funds until you pay off the entire amount in installments, but your payments are reported to the credit bureaus and can help improve your credit score in the long run.

Florida-specific assistance programs

Florida offers financial assistance to eligible residents through a variety of programs. It’s worth checking to see if you qualify for any of the following:

• Temporary Cash Assistance (TCA): Provides financial help to families with children under the age of 18 or 19

• Optional State Supplementation (OSS): Cash assistance for adults who have disabilities or require residential care

• Supplemental Nutrition Assistance Program (SNAP): Assistance for food expenses for qualifying families

Borrowing from family and friends

If you feel comfortable asking a friend or family member to lend you money, this could be a payday loan alternative worth exploring. Make sure you agree on the repayment terms up front.

Side hustles

Taking on a side hustle or extra gig like tutoring, driving for Uber or selling items online can help you cover expenses and build your savings in the long term.

Conclusion

Payday loans may be legal in Florida, but they’re rarely your cheapest or safest option for borrowing money. Look into all your alternatives before moving forward, and if you do decide to take out a payday loan, make sure you know all the associated costs and repayment terms.

FAQs

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

The maximum amount you can borrow with a payday loan in Florida is $500.

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

Payday lenders in Florida can charge a borrowing fee of up to 10% of the loan principal. They can also charge up to a $5 verification fee.

How long do payday loans last?

In Florida, payday loans can last between 7 and 31 days.

Will a payday loan affect my credit score?

A payday loan won’t automatically affect your credit score, but if you don’t pay it back and the lender sells your debt to collections, it will. In this case, there will be a negative entry on your credit report that can ding your score and stick around for years.

Can I get a payday loan with bad credit?

Yes, you can usually get a payday loan even with bad credit. Payday lenders don’t typically require credit checks, though the tradeoff is that you’ll pay sky-high interest rates to borrow money.

What should I do if I can’t repay my payday loan on time?

If you can’t repay your payday loan by the due date, reach out to the lender immediately to discuss your options. You may be able to push back your repayment, but this will usually cost you in the form of rollover fees.

Sources

• Florida Office of Financial Regulation

• National Credit Union Administration

• Florida Department of Children and Families

• MYAccess Florida