The State of California Guide to Payday Loans

California is one of the 50 US states where it is legal for someone to get a payday loan. Despite financial advisers’ warnings about getting a payday loan, people still seem to think that this is a viable option for people who are in need of cash in an instant. Although there are other forms of loans or cash advances that a potential borrower can choose, the payday loan still remains one of the most popular.

A payday loans’ main drawbacks are its high interest rates and the fact that it has to be paid in full on the borrowers next payday. But if you suddenly find yourself in a financial bind and you see this as the only option, use this guide to answer all of your questions about payday loans.

A payday loan is a short term, high interest loan that is very easy to get, hence its popularity with the prospective borrowers. There are minimal requirements; just a bank account in relatively good standing, a steady source of income and some valid identification, and one can already avail of it. Payday loans can be acquired from different establishments like check cashers, pawn shops, and payday loan stores. They are also marketed online and on toll free numbers.

Loan Terms
In California, the maximum loan amount a borrower can get is $300, regardless of the amount of the borrower’s gross monthly income. Gross monthly income refers to the borrower’s monthly salary before taxes have been deducted. In other words, unlike in some other states, the maximum amount a borrower is allowed to loan does not depend on a certain percentage of his or her gross monthly income.

The loan term is at a maximum of 31 days, meaning the loan plus the interest has to be paid within that time period. The maximum finance rate that can be imposed on these types of loans is 15% of the amount of the principal. Finance charges for a 14-day $100 loan is at $17.65 and the Annual Percentage Rate or APR of the same type of loan is 459%

Debt Limits
Borrowers are only allowed one outstanding loan at a time and rollovers are not permitted. A rollover is the act of paying only the interest thus, allowing the principal to rollover to the next payday. There is no cooling off period in between loans and entering into a payment plan is voluntary for the borrower.
No criminal action is to be taken against a borrower in case of nonpayment, but NSF or Non Sufficient Funds fee of $15 shall be imposed. It should be noted also that non-payment of payday loans do have adverse effects on a person’s credit standing.

How to Get Information or File Complaints
To know more about payday loans, pay a visit to or call the regulator, which is the Financial Services Division of the California Department of Corporations. They are located at 1515 K Street, Suite 200 Sacramento CA 95814 and can be contacted via land line (866) 275-2677.

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