Most states have passed payday lending laws that loan companies must follow. With many families taking on excessive debt, the Consumer Financial Protection Bureau stood up to protect consumers from high-interest rates and fees.
When you opt for a payday loan, ensure you are dealing with a reputable lender. Trusted companies always abide by all the regulations in your state of residence. Below, you’ll find a summary of state statutes regarding payday loans by charges, loan amounts, and repayment terms. Anything outside of this scope should be taken with a grain of salt.
Payday Lenders Finance Charges By State
Thirty-seven states have introduced specific statutes that regulate payday lending. Hence, most payday loans are subject to regulatory provisions on the interest rates. Still, loan costs vary significantly across the US states and different lenders.
Some of the highest APRs are applicable in Texas (664%), Utah (658%), Nevada (652%), Idaho (652%), and Wisconsin (574%). States with relatively low APRs include Oregon (154%), Minnesota (200%), Maine (217%), Wyoming (261%), and Rhode Island (261%).
Overall, the interest rate for a 14-day loan of $100 in Alabama will reach 456.25%. Total finance charges in Alabama may not be over 17.5% for the borrowed amount, and the non-sufficient fund (NSF) fees cap at $30.
A payday lender may only charge a $5 non-refundable origination fee. On top of that, charges must not exceed $15 for each $100 or customers will pay 15% of the total loan. Therefore, the total APR for a 14-day loan of $500 with a 20% finance charge will be 520%.
Fees for payday transactions cannot exceed 15% of the face amount of the check. If charged the highest price, customers will only be able to get $255. The overall cost for a two-week $100 loan will be $17.65, whereas the APR can reach 459%. If you don’t repay, the charge for non-sufficient funds is $15.
The expenses imposed by lenders for each payday loan must not exceed an annual rate of 36%. Also, an origination or acquisition cost of 20% is permitted for the first $300, plus 7.5% of the amount over $300. Not paying back on time will result in one NSF collection fee not exceeding $25.
Delaware’s small loan laws permit payday lenders to operate and charge any interest rate or fees the consumer agrees to pay. Meaning, there’s no upper limit on the cost of short-term payday loans. There’s also an NSF cost that caps at $25.
The cash advance may not exceed $500, with fees capping at 10%. The legal verification fee is $5. Thus, the total charges for a two-week $100 loan will be $16.11 or, if translated into APR, 419%.
Payday lenders may charge a cost that doesn’t exceed 15% of the face amount of the check for each small loan transferred. In short, consumers will have to pay $17.65 in charges for a two-week $100 loan or an APR of 459%. NSF fees cap at $20.
The small loan laws in Idaho are relatively lenient and don’t set any limits on the highest interest rate or fees. The only restriction is that small loans can’t exceed 25% of the borrower’s gross monthly income when applying. The NSF cost must not exceed $20 and 12% interest per annum on the due amount.
Lenders can’t charge more than $15.50 for every $100 on any payday loan over its term. Payday lending companies can then levy a cost of $1 for verifying your application. The insufficient funds fee stands at $25. For example, a consumer will repay $115.50 for a two-week $100 loan at an annual rate of 403%.
Charges on the first $250 of each small loan cannot go over 15% of the principal. Next, the cost for payday loans between $250 and $400 must cap to 13% of the amount. Finally, an average consumer will pay 10% for advances from $400 to $550. The total cost for a two-week $100 loan will be $15 and the interest rate will reach 390%.
A licensee shall not charge a fee over $15 on the first $100 on the face amount of the check. The limit on subsequent $100 increments stands at $10 on the face amount of the check. The NFS charge is $15. Hence, the cost equals $16.67 for every $100 borrowed for two weeks. A payday loan borrower in Iowa can expect to pay a 433% interest rate.
A licensed lender may charge an amount no greater than 15% of the payday loan amount. Therefore, the payday loan interest rate caps at 390% for a $500 loan given over two weeks. Moreover, no insurance or any other charges are legal, except for one NSF fee.
Payday lenders cannot charge a service cost over $15 per $100 of the face amount. Also, licensees must prorate charges based upon the maximum price of $15. Note that a database fee of $1 is applicable. The actual APR for payday loans in Kentucky can reach 460 % for finance charges of $17.65 per $100 borrowed over two weeks.
Payday lenders in Louisiana may charge up to $30 per $100 borrowed on a two-week loan. This will lead to an interest rate of 782% on the borrowed amount up to $350. Also, a one-time NSF charge of the greater $25 or 5% may apply.
A lender can contract for and receive a minimum charge of up to $5 when financing is below $75. When the amount financed exceeds $75 but caps at $250, the lender can charge more than $15. Finally, consumers can pay more than $25 when the borrowed amount exceeds $250. The interest rate caps at 217% for payday loans in Maine.
The finance cost for payday loans in Michigan ranges from 11% to 15%, depending on the amount. The highest percentage is for the first $100, while 14% is for the second $100. The third increment entails 13% charges, and the fourth is 12%. As for the fifth and sixth $100, the payment is 11% of payday loans. The total interest rate for a $600 payday loan in Michigan stands at 390%.
Payday lenders may impose up to $5.50 for the first $50 borrowed. For amounts up to $100, the charge may equal 10% of the loan proceeds plus a $5 administrative fee. For payday loans ranging from $100 to $250, the cost is 7% of the loan proceeds (minimum $10) plus a $5 administrative fee.
If a borrower takes more than $250 but less than $350, the charge can equal 6% of the loan proceeds (minimum $17.50). In addition, there’s a $5 administrative fee. After default, the contract rate must not exceed 2.75% per month of the remaining loan proceeds. The one-off NSF fee in Minnesota is $30, whereas the interest rate is about 390% for a $100 payday loan.
The maximum cost for each $100 borrowed up to $250 is $20. In addition, no lender can impose fees over $21.95 for each $100 for advances between $250 and $500. Hence, the average annual rate for a 14-day $100 loan is 520%. Bank NSF fees apply in the amount of $30.
Borrowers can be charged up to 75% of the initial loan value on a single small amount loan. The average APR in Missouri is 443%, but in some cases, it can sky-rocket to 1955% if the lender charges you the maximum of 75% of the loan.
Lenders may not charge a higher interest rate than 36%. On a 14-day $100 loan there is a $1.39 finance charge. The minimum payday loan amount borrowers can take out is $50 and the maximum is $300.
A licensee shall not impose an interest rate over 36% on any payday loans. Plus, no lender can collect, receive, or retain any surcharges except for an NSF fee of $15. Hence, a typical 14-day $100 loan will cost any borrower $117.65 and the interest rate caps at 459%.
Nevada does not have a limit on payday loans. Also, there are no legal restrictions on the interest rates. Extra fees such as NSF and service of process costs are possible. As a result of the lenient policy, the actual payday loan APR in Nevada is 625%.
The annual percentage rate for payday loans cannot exceed 36% in New Hampshire. There’s an extra finance charge for a 14-day $100 loan that equals $1.38. The law doesn’t specify any collection fees.
Lenders can charge an amount that doesn’t go over the upper limit of 20% of the deposit. A database fee and $20 bank NSF fees are also applicable, but no other payment is legal for payday loans. The annual percentage rate goes up to 520%.
Interest rates in Ohio cannot exceed 28%. There’s a 2% loan origination charge for a loan over $500 with no interest. Lenders can also seek a monthly maintenance fee of 10% of the loan’s principal or $30.
Payday lenders may impose a charge that does not exceed $15 for every $100 borrowed to the first $300 of the loan. However, the lender may charge an extra $10 for every $100 advanced over $300. The interest rate caps at 390%, and a $25 bank NSF fee is applicable.
Lenders may not approve or renew a payday loan at an interest rate that exceeds 36% a year. In addition, there’s a one-time origination fee of $10 per $100 of the deposit amount or $30, whichever is less. One $20 NSF fee plus extra bank charges may also apply. To illustrate, the finance charge for a 31-day $100 will equal $13 at an APR of 154%.
Payday lenders cannot charge over 10% of the funds advanced. Hence, any borrower will have to pay $10 for every $100 borrowed over a fortnight. The annual interest rate stands at 261% for Rhode Island.
No payday lender can impose, directly or indirectly, charges over 15% of the initial loan for payday lending. Also, there is a restriction on the NSF cost, which can’t exceed $10 for a check. The typical interest rate in South Carolina for a payday loan is about 391%.
Payday lending in South Dakota must comply with the small loan rate cap that stands at 36%. This amount includes all charges for any ancillary product or service. However, there’s an additional cost of $1.39 for a $100 loan approved for two weeks.
Tennessee payday lending laws don’t specify any NFS or origination fees. The authorized charges cannot exceed 15% of the deposit. In short, the total cost for a 14-day $100 loan will be $17.65. The average interest rate for a small-dollar loan in Tennessee would be 460%.
Texas lenders cannot charge over $1 per $5 borrowed for loans less than $30. For cash advances between $30 and $100, there’s a service fee of 10% of the borrowed amount. For amounts over $100, the maximum cost stands at $10.
Texas laws allow a $3.50 handling charge for loans less than $35. For payday loans between $35 and $70 and over, funding usually involves a $4 monthly fee for every $100 borrowed. The annual percentage rate in Texas can exceed 400% (with an average of 664%), and the NSF charge is $30.
Utah has very lenient payday loan regulations. Therefore, there’s no limit on the interest rates and charges. Lenders can also impose a maximum of $20 for a returned check or if it bounces. In most cases, the annual rate can hit 658%.
The APR for payday lending in Virginia caps at 36%. A monthly maintenance charge of less than 8% of the loan amount or $25 is also applicable. Moreover, borrowers have to pay $20 for overdue payments and a $25 return fee. Overall, the cost for the minimum 4-month $100 loan will be $86.83. Payday loans can easily reach 600% APR in Virginia.
The cost for a $100 loan given for two weeks cannot exceed $15. Payday loans of $500 or less come with a percentage rate of 15%, while loans over $500 up to $700 have a 10% rate. Collection and one-time NSF ($25) bank costs are also applicable. The annual rate can reach 391%.
Failing to repay payday loans in Wisconsin before the maturity date results in an interest rate up to 2.75% per month. Overall, charges can hit an annual percentage of 574% for a typical $300 loan as there is no limit for interest rates on payday loans in Wisconsin. The NSF fee can’t exceed $15 in the state.
No finance charge can exceed the greater of $30 or 20% per month on the principal balance of the post-dated check. Payday lending in Wyoming is not subject to other costs of NSF fees. Furthermore, there are no restrictions on the interest rates, and these can reach 261% for an average $300 loan.
States Where Payday Lending and Payday Loans Are Prohibited
Exactly thirteen states and the District of Columbia have banned payday lending under Consumer Financial Protection Bureau laws. This way, states protect their citizens from predatory payday lenders and ensure borrowers stay away from debt traps. Hence, if you live in one of the areas below and receive an offer for a payday loan, consider it a scam.
- New Jersey
- New Mexico
- New York
- North Carolina
- West Virginia
- The District of Columbia
How to Calculate Payday Loan Fees and Interest
To calculate the APR for payday lending, you must compare the interest and fees for the amount borrowed to the cost for a year. Take a look at the following example:
Martin takes out a 14-day payday loan of $400 to cover a medical bill. The lender charges $15 for every $100 borrowed. How can you calculate the APR your bank or credit union imposes?
- Add all charges to calculate total costs.
$15 x 4 = $60.
- Divide that amount by the borrowed funds.
$60/$400 = 0.15
- Multiply the outcome by 365 (days in a year).
0.15 x 365 = 54.75
- Divide the result by the loan term expressed in days.
54.75/14 days = 3.91
- Multiply the answer by 100.
3.91 x 100 = 391% APR