When you have unplanned expenses and are on a tight budget, a payday loan could be helpful. Payday loans, a type of short-term loan, give you quick access to money when you need it. Read on to find out about the laws in California and everything else you should know about how payday advances work.
Yes, both online and in-store payday loans are legal. California requires all payday lenders to be licensed in the state and follow state laws.
Technically, you can borrow up to $300 as a payday loan. But as a California resident, you have other short-term loan options including installment loans, which come with larger amounts with longer repayment terms and different regulations.
Here’s the basic facts about payday loans in California:
Payday loans are regulated by California Financial Code 23000 and California Civil Code 1789.30. Installment loans and other personal loans are regulated by California Financial Code 22000.
Lawmakers have created new regulations to help prevent the predatory lending tactics some business have used to manipulate consumers in the past. Previously, there was no interest cap on loans over $2,500. With the Fair Access to Credit Act, APR is now capped at 36%.
Under the new law, lenders are also required to report borrowers payments to at least one credit reporting agency and offer access to a credit education course.
Lenders in California are restricted as to how much they can charge you per loan. If a lender tries to charge more than this, you might be dealing with a disreputable lender. If this happens, search around for a better one that abides by state laws.
You can with some lenders — but you might not want to. No credit check loans can come with extremely high rates and it can be hard to find a legit lender. Instead, you might want to look into a short-term lender that relies on a soft credit check, which doesn’t affect your credit score.
Getting a soft credit check takes less than a minute, so it won’t add time to your application. And many short-term lenders are willing to work with bad- or poor-credit customers, so it won’t necessarily get you rejected. You might even be able to qualify for more competitive rates with a lender that conducts a credit pull than you thought you would.
Check out these four lenders that offer payday loans and other types of short-term loans to California residents. They come with minimal credit requirements, fast turnaround times and are licensed to lend in the golden state.
CashNetUSA offers payday advance loans to anyone who’s over 18, has steady income, a checking account and is a US citizen or permanent resident. You can apply quickly online in minutes and potentially get a discount on the fee, using a promo code. It also offers installment loans, which come in larger amounts and can pay off with biweekly repayments over several months. These tend to have stricter eligibility requirements, however.
Looking for a three-month loan or longer-term funding? This lender offers installment loans to California residents, which come in higher amounts and give you more time to pay it back. You can get your funds in as fast as As soon as the same business day., as long as you make at least $3,600 a month, get your income through direct deposit, are at least 18 years old and have a Social Security number.
Another payday lender, LendUp is one of the few that allows you to improve your credit by reporting repayments to the three major credit bureaus. It also offers educational resources to help you make more informed borrowing decisions, including short online courses. You can qualify as long as you’re over 18, have a Social Security number and a checking account that accepts electronic transfers.
These payday loans are only open to borrowers who are 21 or older — but they’re convenient, quick and don’t require a minimum income amount. All you need is a steady source of income, an active checking account at least 90 days old and to be a US citizen or permanent resident. Consider applying in-store with this lender, since it offers a wider range of loan amounts.
If you’re going through a financial emergency — like a car repair or unexpected bill — a payday loan could help you cover immediate costs while you’re waiting for your paycheck to come in. However, it’s important to remember that the high APRs and quick repayment period mean that payday loans are very expensive. Before you borrow, budget for the loan’s total cost, including the amount you have to pay back and any fees.
You can apply for a short-term loan online or at a store location. You can submit an online application from just about anywhere, as long as you have the documents to prove that you’re a resident of California. Remember that in order to obtain a California short-term loan, you must write a personal check for the requested amount to the lender.
Although payday lenders may have different eligibility criteria, you will need to be at least 18 years old, a US citizen or a permanent resident and have a regular source of income.
You’ll also have to provide your Social Security number and details about your checking account. You may also need to provide information from your state-issued ID (such as your driver’s license or passport) and details about your current financial situation.
On top of restrictions on interest rates, fees and how much you can borrow, California also regulates how payday lenders act in certain situations. Look for the following signs to make sure you’re working with a legit lender.
Borrowing online can be a lot more convenient than visiting a payday lender in person. But it also comes with a higher chance of borrowing from an unlicensed lender. The DBO warns borrowers against the following risks of borrowing from an unlicensed lender.
Unlicensed lenders can operate out of state or even outside of the US, making it difficult for California to bring them to justice. That’s why it’s so important to make sure you lender is licensed to operate in California before you borrow.
So you borrowed from a lender that isn’t playing by the rules. It happens. You have two options when it comes to filing a complaint against your lender: Filing with the California Department of Business Oversight (DBO) and filing with the Consumer Financial Protection Bureau (CFPB).
Go to the DBO website and file a complaint online — or print out a PDF and send it in by mail. If the DBO finds that your lender violated state law, it could take action against the business. This includes revoking its license, slapping it with a penalty and even filing a civil action to get a settlement for customers if there’s a big enough case.
You might also want to file a complaint with the CFPB, which is a federal agency that makes sure consumers are treated fairly by financial institutions. You can also do this online by visiting the CFPB website.
These work slightly differently than the DBO complaints. After you submit your complaint, the CFPB reviews it before reaching out to the lender for a response. It then publishes the complaint and the lender’s response online and gives you a chance to respond to the response.
Aside from helping other customers make more informed choices, filing a CFPB complaint also helps guide the federal government when coming up with new regulations.
Here’s what payday loans look like in California, according to the most recent data from the DBO.
If you’re not sure you want to take out a short-term loan, you have other options. Here are some programs and lenders you might want to check out.
California has some programs that can help lower the costs of everyday expenses if you’re struggling to make ends meet.
Some credit unions and local banks offer less expensive small-dollar financing longer repayment terms. You might want to look into credit builder loans, which come in small amounts and can help you improve your credit score by reporting every on-time repayment you make to credit bureaus. You also typically have more time to pay it off.
If you’re struggling with your personal finances, you might want to also consider enrolling in a credit counseling program. These can help you make a budget and manage your debts. The Department of Justice provides a searchable list of government-approved nonprofits that provide credit counseling.
Before you get a payday loan, consider alternatives available to you
So you have a check but you don’t have a bank account to access the funds. A check cashing service might be able to help you out. Make sure it meets California’s regulations before you use its services.
If you’re limited on cash and need only a few hundred dollars to get by, a payday loan might be able to help you out. Just keep in mind that these are high-interest loans, so while you’re able to borrow them back-to-back without waiting, it’s not the best financial decision. Short-term loans are meant for short-term problems, so if you need multiple loans, give credit counseling a try instead.
Can I get a three-month payday loan in California?
Not exactly — payday advances come with a maximum term of 31 days in California. You might be able to find a three-month installment loan, which you repay in three fixed repayments plus interest. How much your three-month loan costs depends on how much you borrow. California regulates APRs on loans of $2,500 and under. Need to borrow more? You might end up with an APR in the triple digits — which can get expensive over a longer-term loan.
Can I take out more than one payday loan at a time?
No. In California, you have to pay off your loan in full before you can apply for another.
Can I get a payday loan in California if I’m unemployed?
You might be able to if you receive a pension, disability, social security or other government benefits. That’s because many lenders consider these as a type of regular income. You might have difficulty getting approved if you don’t regularly have money coming in, however.
Is there a cooling-off period between my repaying one payday loan and getting the next?
No, California doesn’t require you to wait between short-term loans. However, you might want to wait before taking out another payday loan anyway. These loans can be expensive and the cost can catch up to you if you rely on them regularly.
How long does it take to get approved for a short-term loan?
Depending on the lender, you may be able to receive your loan as soon as the next business day if you apply online. If you visit a physical location, you could have your money even sooner.
Can a lender have me arrested if I don’t repay the loan?
Not exactly. Lenders can sue borrowers if they aren’t able to repay their loan, though that won’t end in your arrest. You could wind up in jail, however, if a judge issues a court order for you to repay your debt and you can’t come up with the funds.
You can learn more about what happens if you can’t pay off your payday loan by reading our guide.
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