Home » Which state has the most relaxed payday loan laws?

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Joel Ohman is the CEO of a private equity-backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He also has an MBA from the University of South Florida. ...

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Reviewed by Joel Ohman
Founder, CFP®

UPDATED: May 11, 2012

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Whether seeking in-store or online payday loans, each state has its own laws and regulations regarding short term financing that both lenders and borrowers must adhere to. In a recent article by the Idaho press, the newspaper made the claim that Idaho was among the laxest states on payday loans. We put that to the test and searched for the state with the most relaxed payday loan laws.

What did we find?

After looking at each state’s individual short-term lending statutes, we found Utah has the fewest amount of restrictions on payday loans.

Most states have strict loan amount limits, interest rate limits, and fee limits, but Utah has none of those. The state allows borrowers to take out however much money a short term lender will agree to. Lenders are permitted to charge as much as they’d like, which, in an industry where annual percentage rates (APRs) of 300 to 2000 percent are not uncommon, that can be a terrifying freedom.

Additionally, Utah has no rollover restrictions, there is no limit on how many simultaneous payday loans a borrower can have, and there is no “cooling off” period, which is simply a time period that must elapse between a borrower’s completion of one payday loan and the origination of another.

However, Utah does prohibit the term, as the duration of these cash advance loans may not exceed 12 weeks. But when most payday loans are administered for two-week periods, 12 weeks is extreme in comparison, and allows for massive amounts of interest to accrue.

Conversely, there are several states on the other side of the spectrum that completely outlaw short term lending within their borders. These are the following states in which payday loans are prohibited:

  • Arkansas
  • Arizona
  • Connecticut
  • Georgia
  • Maryland
  • Massachusetts
  • New Jersey
  • New York
  • Pennsylvania
  • North Carolina
  • Vermont
  • West Virginia