In Which States Are Payday Loans Legal And Offered in 2023?

Payday loans can be helpful in times of dire need. Make sure you can get one near you. Check if payday lending is legal in your state and how to avoid scammers.

Payday loans have been in the US for many years. The terms and conditions are evolving, causing the legislation to change as well. Payday lending conditions from state to state have changed rapidly. Stay up to date now!

Why Are Payday Loans Not Legal And Offered in All States?

There is still a decades-long debate about payday loans. There are arguments for it – that it helps the poor access credit. There are also criticisms about the justification of the high-interest charges. 

There is ongoing discourse whether payday lending is good or bad. As a result of differences in opinions and feedback, there is a divide in state legislation. Some states allow it, while some don’t. 

No to Scams, Know What States Legalize Payday Loans

Scammers are always lurking, looking to trick those most in need. The recent surge in demand for payday loans has had scammers making fake advertisements. Borrowers need to be careful not to fall into these debt traps when borrowing.

Payday lending is not allowed in all states. There is no registration and licensing of lenders in states that ban payday lending. If your state prohibits payday lending, there should be no payday loans available. If there are, they are illegal. 

Illegal payday lending is risky and dangerous for borrowers. There is no monitoring of unregistered and unlicensed payday loans. Worst case scenario, the borrower cannot find and sue the lender for fraud or damages.

Be wary and protect yourself from losing your hard-earned money.

Are Payday Loans Permitted in My State?

States have different laws and statutes surrounding payday loans, even legal ones. Legalization does not mean lenders can do whatever they want. There are scope and limitations to payday loans, as with any other activity.

If you are unsure about whether your state permits payday loans or how they work in your area, continue reading down below.

In Which States Are Payday Loans Legal?


Across the country, payday loans are legal in thirty-seven (37) states. The states include Alabama, Colorado, California, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Ohio, Tennessee, and Texas. 

The specifics of the laws and statutes differ per state. There are loan caps, limits to the number of payday loans, etc.


As of November 2020, thirteen (13) states prohibit payday lending. The states are Arizona, Arkansas, Connecticut, Georgia, Maryland, Massachusetts, New Jersey, New York, North Carolina, New Mexico, Pennsylvania, Vermont, and West Virginia.

The states listed above ban all forms of payday loans, including online payday lending. Even payday lenders that only operate online cannot offer payday loans to consumers of the states listed above. Violations of the state laws are subject to fines and other penalties, including imprisonment.

Which States Have Payday Loan Caps?

A loan cap limits the roll-over interest of a loan after it expires. 

  • other payday loan restrictions, like loan caps, 
  • a limit to the maximum amount of the loan
  • a term duration, the maximum number of loans per person
  • additional qualifications and requirements. 

As of March 2021, eighteen (18) states impose a 36% rate cap on payday loan interest rates and fees. Recently, Illinois and Nebraska passed legislation to put caps on all consumer loans, payday loans included. 

States with a 36% rate loan cap are Alaska, Arizona, California, Colorado, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Montana, New Hampshire, Oregon, Ohio, South Dakota, Virginia, Wyoming.

Federal law also caps the payday loan interest for active-duty service members at 36%.

How Can I Tell If a Payday Lender is Legally Licensed in My State?

A payday lender and his/her business must be registered and licensed in the states they operate. Any additional state requires another registration and state license. A payday lender licensed in one state can only do business in said state.

Licenses and Registration

Check for a lender state license. Payday lenders must visibly display their state licenses on the storefront or behind the check counter.

If you are dealing with an online lender, go to their website. A reputable and trustworthy lender will post their license with confidence. If you can’t find it, don’t hesitate to ask.

If you cannot find a state license or are in doubt, you can check with your State’s Attorney General. You can go to their website to find the registration and look for complaints on a lender.

Online Reviews

Thanks to the Internet, it is easier to view other people’s experience with payday lenders. Online reviews are one of the best ways to verify payday lenders and the quality of their service. We are not talking about the reviews lenders themselves put online on their websites. We are talking about the reviews by neutral third-party or customer testimonies. 

You can view payday lender ratings and reviews on Better Business Bureau, Yelp, and Google Reviews.

If Your State Prohibits Payday Loans But You See a Payday Loan Advertisement, It Could Be a Scam!

Any business cannot legally operate without permission from the state. The purpose of business registration and licensing is to protect consumers. State monitoring of payday lenders is a preventive measure against fraudulent activity. If you get in trouble with a lender, you can turn to the state to make them accountable.

If your state prohibits payday loans, but you see an advertisement for it, chances are excellent that it’s a scam. It is very dangerous for a business to operate without a proper license. The state or the federal government has hefty fines against unlicensed business operations. Payday lenders can even go to jail.

Legitimate payday lenders will never risk their business, much less their freedom. Advertisements are easy to make nowadays. Caution is advised. The ad can be another scammer waiting to score a few hundred dollars. Don’t become a victim.

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