Payday Loans are Legal in Alabama

Beware of predatory lending

Payday Lenders in Alabama

Payday loans provide quick access to cash for residents of Alabama. They are often used for covering unexpected expenses or helping the borrower meet financial obligations until their next paycheck arrives.

Alabama residents borrow over $400 million each year in payday loans – the average borrower taking out eight loans annually. Although payday loans offer quick access to funds during financial emergencies, they do come with risks including high interest rates and fees that need to be considered carefully before choosing one as the solution.

To ensure a positive experience, it’s crucial that borrowers select a reputable lender with transparent loan terms. Before signing, borrowers should review all fees and interest rates carefully as well as ask any questions that arise before making their decision. Alabama laws regulate payday loans, and to be eligible, borrowers must meet specific criteria set out in Alabama regulations. To ensure lender compliance, borrowers are encouraged to report any issues or concerns to the Alabama State Banking Department. By understanding the regulations and choosing a reputable lender, borrowers can make informed decisions about payday loans.

Payday Loan Laws

Alabama laws surrounding payday loans are designed to protect consumers from predatory lending practices and ensure that lenders follow the state’s guidance. The legal codes limit the amount of interest that can be charged and the fees that can be added on.

Payday loans do not fall under the Small Loans Act but rather Ala.

Code §5-18A-1 et seq, which requires that all lenders be licensed and that they must disclose all loan information before loan documents can be signed. This statute also regulates the maximum loan amounts, maximum loan terms, and finance charges.
Additionally, Ala. §13A-9-13 prohibits criminal action against borrowers unless a payment is returned due to a closed account.

Loan Terms and Conditions

Maximum loan amount: $500

Maximum Interest Rate: 456% (based on $100 dollars for 14 days)

Minimum loan term: 10 days

Maximum loan term: 31 days

Number of rollovers allowed: 1

Finance charges: $17.50 (based on $100 dollars for 14 days)

Legal action: 6 Years

Certified Payday Lenders in Alabama

Company Name	Company score	License Status
Enova International, Inc.	7.8	Valid
Community Choice Financial, Inc.	7.2	Valid
Advance America	6.8	Valid
Thaxton Investment Corporation	6.5	Valid
Ace Cash	5	Valid
Big Picture Loans, Inc	4.8	Valid

History of Alabama Payday Loans

Payday loans have a long and complicated history in Alabama. The state initially sought to regulate the payday loan industry in 1996, when it passed the Small Loan Act, by putting caps on the interest that could be charged. However, modifications were made in 2002 that resulted in an alternative rate schedule allowing for higher APRs. Then in 2003, the state passed the Deferred Presentment Act increasing the allowable interest rates to where they are today.

State Resources

How to file a complaint

The Alabama Department of Banking provides resources to help borrowers understand their rights and responsibilities when taking out a payday loan. These resources include a brochure outlining the terms of payday loans, a list of licensed lenders, and a complaint form for borrowers who feel they have been treated unfairly.

Alabama Payday Loans Debt Relief

How to Get out of Payday Loan Debt?

Paying back a payday loan in Alabama may seem daunting, but there are options available. First, contact the lender and try to explain the situation. Borrowers can negotiate a repayment plan which involves reducing amounts owed, extending payment periods, or decreasing interest rates. Payday loan lenders in Alabama are required to offer an extended repayment plan that would allow for four equal monthly payments with no additional charges tacked on. They cannot sue for a defaulted payday loan until this has been offered. As another option, refinancing with another loan option that carries a lower interest rate may make it easier to manage payments. As a last option, you may be able to file for bankruptcy and have the loan discharged. Note that bankruptcy should only be considered a last resort and should always be discussed with a lawyer before filing.

Support Resources

Types of Quick Loans in Alabama

Flex Loans Flex loans allow borrowers to access funds on an ongoing basis, up to a predetermined credit limit, essentially creating a line of credit. Unlike traditional loans, which usually have fixed terms and a set payment schedule, flex loans allow borrowers to make payments on their schedule as long as they stay within their credit limit and only charge interest based on the amount borrowed from that limit. The State Banking Department regulates Flex loans in Alabama, but they can be expensive with high-interest rates compared to traditional loans.

Installment Loans Installment loans are an efficient and speedy way to acquire cash quickly. These loans can be found from various lenders, including banks, credit unions, and online lenders. They are typically short-term loans paid back over a specified period in monthly installments. The amount you can borrow and the repayment terms vary depending on the lender. These loans can provide quick access to cash without incurring high-interest charges.

Cash Advance Apps Cash advance apps are becoming increasingly popular in Alabama and the United States as a whole. They allow users to borrow money quickly and easily and usually do not require a credit check. To use a cash advance app, users link their bank account or debit card and then request a loan. If approved, funds are deposited into the borrower’s account within hours. While simple, cash advance apps can be a risky form of borrowing since they often come with high-interest rates and fees.

Alternatives to Payday Loans in Alabama

Personal Loans

Personal loans are a standard financial product in Alabama that are typically unsecured, meaning that borrowers do not have to put up collateral to obtain the loan. Interest rates and terms can vary depending on the lender and the borrower's credit history. Some lenders may require a minimum credit score or income level to qualify, while others may be more flexible. Borrowers should always shop around and compare rates and terms from different lenders to find the best loan for their needs and financial situation.

Home Equity Loans

Home equity loans are a popular financing option in Alabama, providing homeowners access to funds for expenses like home improvements or college tuition. Home equity loans typically feature fixed interest rates and terms between five to 30 years, depending on how much equity a homeowner has built up in their property and their creditworthiness. Any interest paid may even be tax deductible in Alabama when used to make home improvements or cover other qualified expenses. However, taking out a home equity loan could put your home at risk as lenders can foreclose on it if a borrower defaults.

Construction Loans

Construction loans can be used to fund the building of a home or commercial property. Generally, these short-term loans cover materials, labor costs and other expenses associated with construction. Loan terms and conditions differ between lenders but typically require at least 20% down payment as an upfront cost. Borrowers must demonstrate good credit and their ability to repay the loan on time.

Bad Credit Loans in Alabama

Bad credit loans in Alabama can be a great option for those with low credit scores. These loans help those with bad credit rebuild and get back on track financially, though they often carry higher interest rates than traditional loans. When other options are unavailable, bad credit loans may provide the needed funding quickly and easily. Many lenders in Alabama offer these types of loans, so it is important to shop around and compare rates and terms before deciding. Additionally, it is essential to make sure you can afford the loan payments before taking out a loan for bad credit in Alabama since credit score improvement depends on on-time loan payments.

Alabama Small Business Loans

Alabama provides several types of small business loans with different requirements and terms:

SBA loans: The Small Business Administration offers loans through its network of lending partners for eligible small businesses in Alabama.
Business lines of credit: This loan gives businesses access to a set amount of funds, which can be drawn on as needed.
Equipment financing: Equipment financing loans help businesses purchase or upgrade equipment with flexible repayment terms. The asset itself is often utilized as a form of security, allowing those with low credit ratings to qualify.
Invoice factoring: Invoice factoring loans allow businesses to sell their accounts receivable at a discount to a lender in exchange for immediate cash.
Merchant Cash Advances: This type of loan provides businesses with a lump sum payment in exchange for a percentage of future credit card sales.

VA loans in Alabama

VA loans are a popular mortgage option for eligible military members, veterans, and their surviving spouses. The Department of Veteran Affairs backs these loans and offers several benefits, including no down payment requirements, lower interest rates, and no private mortgage insurance (PMI) requirements. VA loans can be used for various purposes, including home purchases, refinancing, and home improvements but have a cap of $647,200 for all counties in Alabama. Alabama veterans looking to secure a VA loan must meet specific eligibility requirements in order to be considered, such as serving a minimum active duty term or being the surviving spouse of a deceased veteran. Overall, VA loans are a valuable financial tool for eligible military members and veterans looking to purchase a home in Alabama.

Alabama Student Loans

Many options are available to Alabama students to help finance their college education. These options include:

Federal Student Loans: Alabama students have access to federal student loans, an invaluable financial resource that they can use for college tuition and other associated costs.

The Alabama Student Grant Program: Provides need-based financial assistance to Alabama residents attending eligible colleges and universities in the state.

The Alabama Student Assistance Program: Provides financial assistance to Alabama residents attending eligible postsecondary institutions in Alabama and out-of-state institutions participating in the Academic Common Market Program. The maximum amount awarded through the program varies each year and is subject to the availability of funds.

Private Student Loans: Offered by banks, credit unions, and other private lenders, and often have higher interest rates than federal or state funding. Students can use these to cover education expenses that federal loans don't cover.

Alabama Income Information

According to the 2021 U.S. Census, Alabama had a median household income of $54,943, significantly below its national median of $70,717. Alabama has a lower cost of living than the national average, allowing income to go further. Manufacturing, healthcare, and education industries dominate Alabama’s economy while it hosts multiple Fortune 500 companies. The poverty percentage in Alabama in 2021 was 16.1%. Income and poverty levels vary drastically depending on the county. Shelby County has the highest median household income of $70,879, while Wilcox County has the lowest, at $23,041.

United States Census Bureau. “Poverty in the United States: 2021.” Accessed on April 14, 2023.
United States Census Bureau. U.S. Census Bureau QuickFacts: Alabama . Accessed on April 14, 2023.

Alabama Payday Lender Complaints

Below are trends associated with the top payday lenders in Alabama, as reported to the Consumer Financial Protection Bureau.

Company Name	Count
Enova International, Inc.	8
Community Choice Financial, Inc.	7
Advance America	7
Thaxton Investment Corporation	5
Ace Cash	3
Big Picture Loans, Inc	3
Total Complaints	114

Consumer Financial Protection Bureau. Consumer Complaint Database. Accessed on April 14, 2023.

Most Common Issues

Complaint type	Count
Struggling to pay loan	37
Received a loan you never applied for	13
Charged unexpected interest or fees	12
Unable to contact lender	10
Approved but never received funds	8

What are the main reasons residents of Alabama apply for payday cash advance online or offline

Payday loans are typically used for nonnegotiable everyday expenses like your rent, utilities, and groceries. Per data reported by Pewtrust, the percentage of reasons described below

Reason	Share
Regular Expenses (Utilities, car payment)	53%
Unexpected emergency/expense	16%
Rent/Mortgage	10%
Something Special	8%
Other	5%
Did not answer	2%

Payday Lenders by City

Huntsville
Birmingham
Montgomery
Mobile
Tuscaloosa
Hoover
Auburn
Dothan
Decatur
Madison

Florence
Vestavia Hills
Phenix City
Prattville
Gadsden
Alabaster
Opelika
Northport
Enterprise
Daphne

Homewood
Bessemer
Athens
Trussville
Pelham
Albertville
Oxford
Mountain Brook
Fairhope
Anniston

Frequently Asked Questions

Will applying for a payday loan impact my credit?

Payday loans are typically not reported to the three major credit reporting agencies, and most lenders do not conduct credit checks as part of their application process.

What do I need to apply for a payday loan?

To apply for a payday loan in Alabama, you will typically need to provide your identification, proof of income, bank account information, and contact information.

Can I cancel my payday loan?

You can cancel your payday loan in Alabama, but the cancellation period and requirements may vary depending on the lender and loan agreement. It’s important to carefully review the loan agreement terms and contact the lender as soon as possible if you want to cancel the loan.

Can a payday loan lender garnish my wages?

No, payday lenders in Alabama cannot garnish wages.

Can spouses have separate loans?

Yes, spouses can have separate payday loans in Alabama as long as they individually meet the lender’s eligibility requirements and can provide the necessary documentation and information to apply.

When will I receive my funds if I am approved for a payday loan?

You will receive your funds on the same day or the next business day, depending on the lender’s policies and the timing of your application.

What happens if I can’t repay my payday loan on time?

The lender may charge additional fees and interest and take legal action to collect the debt.

When could I apply for another payday loan?

Alabama allows borrowers who pay off a payday loan to apply for another one immediately; however, certain cities may impose a waiting period before accepting a second payday loan application.