A payday loan is a small, short loan that you repay in one payment, usually on your next payday. It is quick to get but expensive: a flat fee on a two-week loan works out to a very high APR. Whether it is allowed, and how much it may cost, depends on your state.
How a payday loan works
- You apply with your ID, proof of income and bank account details.
- The lender decides quickly, often the same day, and shows the fee, the APR and the due date in writing.
- You authorize repayment: the lender may take the money from your account on the due date, or hold a post-dated check.
- You get the money, often by direct deposit.
- You repay in full on the due date, which is usually your next payday, a few weeks away.
What a payday loan costs
Payday lenders usually charge a fee for each $100 you borrow rather than monthly interest. Because the loan lasts only a couple of weeks, that fee is a very high APR.
For example, under Florida's limits, borrowing $100 for 14 days costs $15 in fees, so you repay $115. That works out to 391% APR. Some states cap fees lower, and a few set no cap at all.
The lender must show the fee and the APR in writing before you sign, under the federal Truth in Lending Act and Regulation Z. Compare that APR with any other option you have.
Where payday loans are allowed
Of the 50 states and DC we cover, 15 do not allow payday loans: Arizona, Arkansas, Connecticut, District of Columbia, Georgia, Hawaii, Maryland, Massachusetts, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, Vermont, West Virginia. The others allow them under a state payday law. Most of those laws cap the fee and the loan amount; a few, such as Texas, set no fee cap. See every state side by side in the state payday loan law table.
Federal rules that apply everywhere
- Your bank account. After two payment attempts in a row fail, the lender needs your new permission before it tries to take money from your account again (CFPB payday rule, in force since March 30, 2025).
- Service members and their families. The Military Lending Act caps the cost of most consumer loans, payday loans included, at a 36% military APR (CFPB: Military Lending Act).
The risks to weigh
- The whole loan is due at once. Repaying it in full on payday can leave you short for other bills.
- Renewals add up. Where a state allows rollovers, each one adds another fee without paying down the loan.
- Bank fees. A payment that bounces can bring a fee from the lender and another from your bank.
Alternatives to compare first
- A personal installment loan spreads the cost over several payments. How installment loans work.
- A payday alternative loan (PAL) from a federal credit union. NCUA rules cap their interest rate at 28%, plus an application fee of no more than $20.
- A payment plan with the company you owe. Many utilities, hospitals and landlords offer one if you ask early.
- A title loan borrows against your car instead. It puts the car at risk; read how title loans work first.
Payday loan laws by state
Each state page answers whether payday loans are legal there and lists the fee cap, loan limit, term, rollover rule and statute, checked against the law itself. We are adding states in batches; every state is already in the state table.
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