Payday loans: how they work and what they cost
A payday loan gets you a few hundred dollars fast and is repaid in one payment, usually within two to four weeks. The typical fee is $15 per $100, an APR of about 391%, and the rules change from state to state.
The short version
- The typical fee is $15 for each $100 borrowed, due with the loan in about two weeks.
- 29 states allow payday loans; the rest cap rates or ban them.
- Rollovers add a new fee each time without lowering what you owe.
- A licensed lender must show you the finance charge and the APR before you sign.
On this page
How a payday loan works
You borrow a small amount, usually $500 or less, and agree to repay it in a single payment on your next payday. To secure the loan you give the lender a postdated check or permission to debit your bank account. Instead of monthly interest the lender charges a flat fee, most often $15 for every $100.
Borrow $300 and you owe $345 two weeks later. Stretch that price across a year and it equals an APR of about 391%. The cost calculator shows the legal maximum for your state.
What it costs, in dollars
| You borrow | Typical fee | You repay | APR (14 days) |
|---|---|---|---|
| $100 | $15 | $115 | 391% |
| $300 | $45 | $345 | 391% |
| $500 | $75 | $575 | 391% |
Fees are set by state law, so the real number where you live may be lower or higher. Florida allows $10 per $100 plus a $5 verification fee; Alabama allows $17.50 per $100; Texas sets no cap at all.
The fee covers two weeks. If you cannot repay and roll the loan over, you pay the fee again and still owe the full amount. Borrowers who renew several times can pay more in fees than they borrowed.
Who can get one
Lenders usually ask for a government ID, proof of regular income and an active checking account. Many do not pull a report from the three major credit bureaus and review other data instead, so a low score is rarely the deciding factor. Approval is still never certain, and a lender that promises it before seeing your details is not being straight with you.
Where payday loans are legal
State law decides everything: whether payday loans exist, the largest loan, the highest fee, and whether rollovers are allowed. Twenty-nine states permit them. Ten states cap small loans at 36% to 50% APR, which removes the two-week payday loan from the market, and the remaining states and D.C. do not allow them. Find your state in the list below, or see the full comparison table.
Online payday loans
An online lender must follow the law of the state where you live, and in most states it needs a license from that state. Before you apply, look the company up with your state regulator. Be careful with sites that only collect your details: they are lead generators, which pass your information to lenders and other companies. Our guide to payday loan scams lists the warning signs.
Cheaper options to try first
- A payday alternative loan from a federal credit union: $200 to $2,000 at no more than 28% APR
- A payment plan with the landlord, utility or hospital you owe
- A cash advance app, if you only need $50 to $250 until payday
- Local assistance through 211 for rent, utilities and food
See all payday loan alternatives, or read how to borrow money fast for a ranked list.
Payday loan rules by state
Each state page lists the legal status, maximum loan, fees and the regulator that handles complaints.
- AlabamaLegal
- AlaskaLegal
- ArizonaCapped at 36% APR
- ArkansasNot allowed
- CaliforniaLegal
- ColoradoCapped at 36% APR
- ConnecticutNot allowed
- DelawareLegal
- Washington, DCNot allowed
- FloridaLegal
- GeorgiaNot allowed
- HawaiiCapped at 36% APR
- IdahoLegal
- IllinoisCapped at 36% APR
- IndianaLegal
- IowaLegal
- KansasLegal
- KentuckyLegal
- LouisianaLegal
- MaineLegal
- MarylandNot allowed
- MassachusettsNot allowed
- MichiganLegal
- MinnesotaCapped at 50% APR
- MississippiLegal
- MissouriLegal
- MontanaCapped at 36% APR
- NebraskaCapped at 36% APR
- NevadaLegal
- New HampshireCapped at 36% APR
- New JerseyNot allowed
- New MexicoCapped at 36% APR
- New YorkNot allowed
- North CarolinaNot allowed
- North DakotaLegal
- OhioLegal with price limits
- OklahomaLegal with price limits
- OregonLegal with price limits
- PennsylvaniaNot allowed
- Rhode IslandLegal
- South CarolinaLegal
- South DakotaCapped at 36% APR
- TennesseeLegal
- TexasLegal
- UtahLegal
- VermontNot allowed
- VirginiaLegal with price limits
- WashingtonLegal
- West VirginiaNot allowed
- WisconsinLegal
- WyomingLegal
Common questions
How much can I borrow with a payday loan?
Most states that allow payday loans cap them between $300 and $1,000. California’s limit is a $300 check, which puts $255 in your hand; Delaware and Idaho allow $1,000.
Do payday lenders check credit?
Many skip the three major bureaus and use other databases to verify identity, income and past payday loans. That still counts as a review, and it does not mean approval is automatic.
How fast is the money?
Storefront lenders can pay out on the spot. Online lenders often deposit the next business day; timing depends on the lender and your bank’s cut-off.
What happens if I can't repay?
Fees, collection calls and possibly a lawsuit. You cannot be arrested for an unpaid loan. Ask for a payment plan early; many states require lenders to offer one.
Does Northlight lend money?
No. Northlight is an information site. We explain costs and state rules so you can decide; we do not make loans or credit decisions.
Check the rules where you live
Whether you can borrow, how much, and what a lender may charge all depend on your state.
Sources
Keep reading
- Same day loansSame day loans depend on the lender, the payment method and your bank's cut-off. See which options are truly fast and what speed costs.
- Payday loan debt helpStuck renewing payday loans? Learn how extended payment plans, consolidation loans and nonprofit counseling work, and which relief offers to avoid.
- Title loansA car title loan can cost about 25% a month and put your vehicle at risk. See how title loans work, what they cost and what to try first.
- Payday loan alternativesEight alternatives to a payday loan, from credit union PALs at 28% APR to assistance you never repay, with costs and how to apply for each.
- Tribal loansTribal lenders are owned by Native American tribes and claim immunity from state rate caps. Learn what that means for cost, rights and risk.
- Paycheck advanceEmployer advances and earned wage access let you use pay you have already earned. Compare the costs with payday loans and cash advance apps.