If you're short on cash before payday, you might assume a payday loan is your fastest option. In Illinois, that's no longer true. The Illinois Predatory Loan Prevention Act (PLPA), effective March 23, 2021, caps the all-in APR on consumer loans at 36%, using the same methodology as the federal Military Lending Act. Before the cap, the average APR on a payday loan in Illinois was 297%, according to the Illinois Department of Financial and Professional Regulation's 2020 Consumer Lending Trends Report.
Today, a loan priced above 36% APR is void and uncollectable under Illinois law, and the IDFPR reports that nearly every high-cost payday and auto title lender has surrendered its Illinois license since the cap took effect.
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Not in the traditional triple-digit-APR sense. Illinois law still permits licensed payday lenders to operate under the Payday Loan Reform Act, but those loans are also subject to the PLPA’s 36% cap. Because a payday loan’s traditional fee structure translates to an APR far above 36%, the market for them has effectively disappeared, and the IDFPR reports that nearly every high-cost payday lender has surrendered its Illinois license since the cap took effect.
If you’re looking for short-term credit in Illinois today, you’ll generally find it through capped installment lenders, credit unions or cash advance apps rather than a traditional payday loan.
These options are widely available in Illinois and cost far less than a high-cost payday loan.
Cash advance apps typically let you borrow up to a few hundred dollars against income you’ve already earned, with no interest charged. You’ll usually need a linked bank account and a history of regular deposits to qualify, and some apps charge an optional fee for instant transfers or a small monthly membership.
If you need more than a few hundred dollars, a personal loan from a lender that works with bad-credit borrowers and operates legally in Illinois can be a better option. Because of the PLPA, any lender offering credit to Illinois residents must keep the APR at or below 36%, which already limits how expensive the loan can get.
Federal credit unions can offer two types of PALs, both capped at 28% APR. PAL I loans range from $200 to $1,000, require one month of credit union membership and give you up to six months to repay. PAL II loans go up to $2,000, have no waiting period and give you up to 12 months to repay. You’ll need to join a participating federal credit union to qualify for either type.
If you already bank with a credit union or community bank, ask about small-dollar loans or personal lines of credit for existing customers. These often come with lower rates than online lenders and a faster approval process if you’re already in good standing.
Some employers will advance part of your next paycheck if you ask. The amount comes out of your following paycheck, and most employers don’t charge interest for it. Your job may also participate in an earned wage access program, which allows you to receive a portion of your paycheck early.
Illinois lenders are limited to a 36% all-in APR under the PLPA, calculated using Military APR (MAPR) methodology, which folds in fees and other charges so lenders can’t sidestep the cap by relabeling interest as fees. The cap applies to most non-depository lenders, including payday lenders, installment lenders and auto title lenders. Any loan written above 36% APR is null and void, meaning the lender has no legal right to collect principal, interest or fees on it.
One notable carveout: pawnbrokers are governed by the separate Pawnbroker Regulation Act of 2023 (Public Act 103-0585, effective March 22, 2024) rather than by the PLPA. Under that law, pawnbrokers can charge monthly finance charges of up to 20% of the pawn amount for loans under $500 — which works out to a maximum of 240% APR for small pawns. If you’re considering a pawn loan, ask for the APR up front and compare it against the alternatives above.
If you’re short on cash for a recurring need rather than a one-time emergency, these programs may help more than any loan would.
You can call 211 or contact your local community action agency to get connected with any of these programs.
Illinois’s 36% APR cap means the kind of high-cost payday loan still legal in many other states isn’t available here anymore. That’s good news for your wallet, but it also means you’ll need to look to capped installment lenders, credit unions or cash advance apps for short-term credit instead. If a lender offers you a loan with an APR above 36%, that loan is likely unenforceable under Illinois law. If you’re dealing with an ongoing budget shortfall rather than a one-time gap, Illinois’s energy, food and cash assistance programs are worth checking before you borrow at all.
We explore loans, fee waivers, financial assistance programs and other options to help you cover the costs of these tickets.
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