If you’re looking for a payday loan, you may be wondering which US states are payday loans legal in. Not all states allow payday lending, so it’s important to know where you can and cannot get a loan.
In this blog post, we’ll discuss the legality of payday loans in each state and provide some tips on how to find a reputable lender. Let’s get started!
Which States Are Payday Loans Legal In?
Payday loans are legal in 37 states, including Alabama, Colorado, Indiana, Kentucky, Ohio, and more. Texas, California, and Nevada are the three states with the largest number of payday loan storefronts.
If you reside in one of these 37 states, you can get a payday loan without any legal repercussions. Within these states, there will be regulations though on payday loans – for instance, interest rate caps and maximum loan amount.
The other 13 states have either banned payday loans or placed strict regulations on them. Unfortunately, this means that if you reside in one of these states, you will not be able to get a payday loan in the traditional way – we will explain what this means.
Which US States Are Payday Loans Not Legal In?
The 13 states where payday loans are not legal:
- Arizona
- Arkansas
- Connecticut
- Georgia
- Maryland
- Massachusetts
- New Jersey
- New York
- North Carolina
- Pennsylvania
- Vermont
- West Virginia
- District of Columbia
See the below table for payday lending legality in all US states. For more detailed information visit the National Conference of State Legislatures page about Payday Lending.
| State | Payday Lending Legal Status |
| Alabama | Legal |
| Alaska | Legal |
| Arizona | Prohibited |
| Arkansas | Prohibited |
| California | Legal |
| Colorado | Legal |
| Connecticut | Prohibited |
| Delaware | Legal |
| Florida | Legal |
| Georgia | Prohibited |
| Hawaii | Legal (Restricted) |
| Idaho | Legal |
| Illinois | Legal |
| Indiana | Legal |
| Iowa | Legal |
| Kansas | Legal |
| Kentucky | Legal (Restricted) |
| Louisiana | Legal |
| Maine | Legal (Restricted) |
| Maryland | Prohibited |
| Massachusetts | Prohibited |
| Michigan | Legal |
| Minnesota | Legal |
| Mississippi | Legal |
| Missouri | Legal |
| Montana | Legal (Restricted) |
| Nebraska | Legal |
| Nevada | Legal |
| New Hampshire | Legal (Restricted) |
| New Jersey | Prohibited |
| New Mexico | Legal |
| New York | Prohibited |
| North Carolina | Prohibited |
| North Dakota | Legal |
| Ohio | Legal (Restricted) |
| Oklahoma | Legal |
| Oregon | Legal |
| Pennsylvania | Prohibited |
| Rhode Island | Legal |
| South Carolina | Legal |
| South Dakota | Legal |
| Tennessee | Legal |
| Texas | Legal |
| Utah | Legal (Restricted) |
| Vermont | Prohibited |
| Virginia | Legal |
| Washington | Legal (Restricted) |
| West Virginia | Prohibited |
| Wisconsin | Legal |
| Wyoming | Legal |
| Washington, DC | Legal |
Why Are Payday Loans Illegal In Some States?
The most common reason why payday loans are illegal in some states is that they are considered to be “predatory” lending. This means that the interest rates and fees associated with these loans are seen as being too high for borrowers to realistically repay them.
In addition, many states have laws in place that protect consumers from being taken advantage of by lenders. These laws may place restrictions on the amount of interest that can be charged, the fees that can be assessed, and the overall terms of the loan.
As a result, payday loans are often not available in states where they are considered to be illegal. However, as we mentioned we would explain a bit more in detail, with a small legal loophole, you may still be able to get a payday loan online from a Native American payday lender. To understand a bit more about how this works, read our blog post about tribal lending.
If you’re looking to borrow money in one of these “illegal” states, your best option would be to find a lender that offers installment loans or personal loans. These types of loans typically have lower interest rates and fees, and you may have more time to repay them.
Why Are Payday Loans Legal In Some States?
The answer to this question is two-fold. First, state legislatures have passed laws making them legal. And second, the federal government has declined to preempt those state laws.
Legality of Payday Loans in the United States by State. Image source: Wikipedia
How Do Payday Loans Benefit The State?
Payday loans offer several benefits to the state. They provide a source of short-term credit for consumers who may not qualify for traditional forms of credit.
In addition, they help to stimulate the economy by allowing borrowers to access funds that they can then use to make purchases.
They also provide a source of revenue for the state. This is because payday lenders are typically required to obtain a license to operate within a state.
And finally, they help to create jobs. This is because when payday lenders open up shop in a state, they often create new jobs for people who work in their stores.
What Are The Risks Of Payday Loans?
Payday loans do come with some risks. The most common risk is that borrowers may not be able to repay the loan. This can lead to default and, as a result, the borrower may end up having to pay additional fees.
In addition, payday loans can often trap borrowers in a cycle of debt. This is because they typically have very high-interest rates. As a result, borrowers may find themselves taking out new loans to repay old ones.
Summary
Payday loans are not available in 13 states in the U.S. due to state laws that consider them to be “predatory” lending. In addition, the federal government has declined to preempt these state laws.
However, payday loans do offer several benefits to the state, including providing a source of short-term credit for consumers and stimulating the economy.
