Are payday loans legit?

Quick Answer Payday loans are legitimate because they are offered by licensed lenders and regulated by certain laws. However, it's important to be aware that they often come with high fees and interest rates. You should explore alternative options before deciding to take out a payday loan.

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Kevin Johnson ā€¢ Answer updated on Jul 4, 2023

Fact checked by Doreen Dumesle

Yes, payday loans are legit, but whether or not a payday loan is legal will depend on the state laws where you live.

Notably, some parts of the country have completely banned local and online payday loans:

  • Arizona
  • Arkansas
  • District of Columbia (Washington, D.C.)
  • Georgia
  • Hawaii
  • New Mexico
  • North Carolina[1]

If someone offers you a payday loan in these states, run away! šŸƒā€ā™‚ļøšŸ’Ø They're for sure trying to scam you.

Learn: Can I get a payday loan in another state?

All other states allow payday loans āœ…. However, even where payday loans are allowed, there are often state laws in place to provide some regulation over them. For example, in Washington state, borrowers can only take out eight payday loans per year.[2] Other states regulate loan fees, APR rates, and/or loan amounts.

The reason why payday loans are subject to strict regulation (and even banned in some states) is because they often have extremely high APRs. Payday loan APRs are often around 400%! This can make it hard to repay your loan and can cause you to get caught in a cycle of debt.

Learn: Can payday loans garnish your wages?

Because of this, I'd recommend that you always look into alternate options before taking out a payday loan, no matter what your local regulations might be.

Even if you have bad credit, there are other lending options ā€” like installment loans ā€” which can be easier to pay off and have a lower probability of sticking you with inescapable debt.

  1. Payday Lending State Statutes ā†©ļøŽ

  2. Consumers Guide to Payday Loans In Washington State ā†©ļøŽ

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