Payday Loans Colorado

Learn about payday loan regulations in Colorado with zaving.

Last updated by Zaving Editorial Team, on April 22nd, 2024

Seeking financial support in Colorado? Whether it's for unexpected expenses or managing bills, having access to reliable solutions is important. Explore the payday lending laws in Colorado and discover alternative options with zaving to find the assistance you need.

What is a payday loan and can I get one in Colorado?

A payday loan is a short-term, high-interest loan typically due on the borrower's next payday. These loans are often sought by individuals facing unexpected expenses or financial emergencies and provide quick access to funds, usually ranging from $100 to $500. Borrowers typically repay the loan in full, along with interest and fees, within a few weeks.

In Colorado, while payday loans are technically legal, restrictions essentially prohibit them by making it unviable for payday lenders to operate in the state. Legislation passed in 2018 included provisions that severely curtailed the payday loan industry, capping interest rates at a maximum of 36% annual percentage rate (APR) and mandating a minimum repayment term of six months. Borrowers are also limited to a maximum loan amount of $500.

The combination of the low maximum loan amount, extended repayment terms, and capped APR significantly diminishes the profitability of payday lending operations in the state. As a result, while payday loans are technically legal in Colorado, they are unavailable as a financial option for consumers in the state.

What are the alternatives to payday loans in Colorado?

Here are some alternative options to payday loans in Colorado that individuals can explore when facing short-term financial challenges:

  • Personal installment loans: Consider applying for personal installment loans from banks, credit unions, or online lenders. These loans typically offer longer repayment terms and lower interest rates compared to payday loans.
  • Credit union loans: Joining a credit union may provide access to small-dollar loans with more favorable interest rates and flexible repayment terms. Individuals can inquire about loan options available through credit unions.
  • Emergency assistance programs: Local community resources and government programs may offer emergency financial assistance, such as grants, vouchers, or low-interest loans, to help cover unexpected expenses.
  • Financial counseling services: Nonprofit credit counseling agencies or financial counseling services can provide guidance on budgeting, debt management, and alternative financial solutions.
  • Negotiate payment plans: Contacting creditors or service providers to negotiate payment plans or request extensions on bills can help individuals manage their financial obligations more effectively.
  • Local charities and nonprofit organizations: Seeking assistance from local charities, churches, or nonprofit organizations that provide support with essential needs such as food, housing, and utilities may offer financial assistance programs or referrals to other resources.
  • Friends and family: Consider reaching out to friends or family members who may be willing to provide assistance during challenging times. It's important to have clear communication about repayment terms and expectations to maintain positive relationships.

Can I take out a payday loan in another state?

Securing a payday loan requires residency in the state where the loan is obtained. Lenders carefully verify the borrower's residency during the application process to ensure adherence to state laws and regulations. Attempting to obtain a loan from an out-of-state lender can result in denial or penalties for misrepresentation, emphasizing the importance of residency status in determining eligibility.

Additionally, payday lenders are typically licensed to operate only within the states where they are registered. This regulation ensures that lending practices are governed by the laws of the state where the lender is established.

State laws govern various aspects of payday lending, encompassing interest rates, fees, maximum loan amounts, repayment terms, rollovers, and borrowing limits. Understanding the regulations specific to the state of residence is essential for borrowers.

As of February 2024, payday loans are legal in 29 U.S. states: Alabama, Alaska, California, Delaware, Florida, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Missouri, Nevada, North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, Tennessee, Texas, Utah, Virginia, Washington, Wisconsin, and Wyoming. However, payday loans are prohibited or severely restricted in the District of Columbia and several states, such as Arizona, Arkansas, Colorado, Connecticut, Georgia, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, South Dakota, Vermont, and West Virginia.