Are Payday Loans Illegal In Some States?

Payday loans are illegal in some states. These include:

• Arizona

• Arkansas

• Connecticut

• Georgia

• Hawaii

• Maryland

• Massachusetts

• New Jersey

• New York

• New Mexico

• North Carolina

• Pennsylvania

• Vermont

• West Virginia 

The specifics on how payday loans are outlawed in particular states vary. For example, Arizona lawmakers allowed its payday lending authorization to expire back in 2010, and Georgia classified payday lending as racketeering, carrying felony charges and heavy fines for lenders who break the rules. But the bottom line is the same: it’s impossible to get a payday loan in these states. 

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States That Heavily Regulate Payday Loans

Even if a state doesn’t ban payday loans outright, many impose significant regulations designed to protect borrowers to some degree. In states that heavily regulate payday loans, it might be more difficult to find one. 

One way states regulate payday lending is by setting interest rate caps. A few states that have capped payday loan interest rates at 36% include:

• Colorado

• Illinois

• Montana

• Nebraska

• New Hampshire

• Oregon

• South Dakota

• Virginia

In these states, payday loans may be harder to find due to state regulations.

Alternatives To Payday Loans

If you live in a state that doesn’t have a lot (or any) payday loan providers, it might still be possible to get your hands on much-needed funds. Even if you live in a payday loan-friendly state, you might want to seek out an alternative option due to the notoriously high interest rates that come attached to payday loans. 

Take a look at some potential funding solutions that don’t require a payday loan. 

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Personal Loan

Personal loans don’t require collateral. After you take out this loan, you’ll repay it in monthly installments over a predetermined period of time. For borrowers with a good credit score, the interest rates on personal loans can be significantly lower than those attached to a credit card or payday loan. 

Payday Alternative Loan (PAL)

Some credit unions offer Payday Alternative Loans (PALs). Typically, these offer borrowers a relatively small amount of funding with a short repayment timeline and more manageable interest rates than traditional payday loans. 

Buy Now, Pay Later (BNPL)

If you’re looking for cash to fund a particular purchase, Buy Now, Pay Later (BNPL) services might be a viable solution. Essentially, a BNPL loan is an installment loan that allows you to finalize a purchase with little or no money down. After you commit to the loan, you’ll usually be expected to repay the loan in four or fewer interest-free payments. 

Payment Plans

Depending on why you need the cash, a payment plan for the particular expense could make sense. For example, if you have a medical bill that you don’t have the funds on hand to cover, consider asking the provider for a payment plan instead of paying the entire balance upfront. 

Credit Card Cash Advance

For those with a credit card in their wallets, a cash advance might provide a quick solution. Unlike swiping your card for an expense, a cash advance allows you to borrow cash against your credit card balance. But keep in mind that credit card cash advances often come with high fees and interest rates attached. 

Help from Family or Friends

If you have family or friends you can turn to, borrowing from them could help you make it through a tough financial situation. Of course, make sure to only borrow what you can afford to repay. Also, consider signing a written repayment agreement to make sure everyone is on the same page. 

Pick Up a Side Hustle

If you have the capacity to make extra money, that’s a great way to get the funds you need without tapping into a payday loan. For example, you might pick up an extra shift at work or pick up a flexible side hustle, like driving for Uber or delivering groceries, to get the funds you need. 

FAQs

What can I do instead of payday loans?

A few ways to access cash without a payday loan include getting a cash advance, taking out a personal loan, borrowing from family, and picking up a side hustle. 

How can I avoid payday loans?

You can avoid payday loans by attempting to plan ahead for expenses and building an emergency fund to handle whatever life throws your way. 

What to do when no one will give you a payday loan?

If you can’t find a payday loan, consider a personal loan, cash advance, paycheck advance, or BNPL service as a potential solution. Another option is to increase your income through extra shifts or a side hustle to get the funds you need without taking on debt. 

Sources

• States Where Payday Loans Are Illegal: Bans & Caps. LegalClarity.

• What should I do if I can’t pay a medical bill? CFPB.

• What is a Buy Now, Pay Later (BNPL) loan? CFPB.

• What is a personal installment loan? CFPB

• Payday Alternative Loans. MyCreditUnion.gov

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