Payday loans are often marketed as fast and easy solutions to bridge financial gaps between paychecks. If you're in a tight spot financially, they might sound tempting. But payday loans aren’t always the best option because of their high interest rates and fees.
And, if you’re in New York, they’re actually not an option at all. Payday loans are illegal in New York State because of their tendency to trap borrowers in cycles of debt.
Thankfully, however, payday loans aren’t the only way to get an advance when you need it. There are better, safer alternatives to borrowing money fast in New York. This article will walk you through those options. But let’s start with the basics first.
What is a payday loan?
A
payday loan is a short-term, high-interest loan typically designed to be repaid with your next paycheck — usually in about two to four weeks. They are often marketed to people who need emergency cash. The loan amounts are generally smaller than other kinds of loans, like personal loans.
Payday loans often have extremely high interest rates. In many instances, these can be as high as an annual percentage rate (APR) of 400%. (Yeah, you read that right.) But some payday lenders don’t require credit checks, making them attractive to people with poor credit. They also can be approved very quickly — often within minutes.
Although payday loans are intended to be a stopgap, they can lead to mounting debt if you don't repay them on time.
Why are payday loans illegal in New York?
The state of New York considers high-cost, short-term payday loans “predatory.” This is largely due to the aforementioned high interest rates.
The state caps APRs on small loans from licensed lenders at 25%. Unlicensed lenders must not charge above 16%. Most payday loans far exceed that limit. This is why they are outlawed or heavily regulated in many states. Borrowers often need to take out another loan just to repay the first one, potentially leading to a dangerous financial spiral.
5 alternatives for New York borrowers
Payday loans might be off the table, but New Yorkers have other possibilities for accessing cash in an emergency situation. Here are five options to try:
Personal loans. Personal loans from banks or other reputable online lenders typically offer longer repayment periods and lower interest rates than payday loans. You should have a decent credit score to access a personal loan. Most lenders require a credit score of 600 or higher. However, there are
personal loan options for people with poorer credit scores.
Credit card cash advance. A
credit card cash advance lets you withdraw cash from your credit limit at an ATM or bank. While this is quicker than applying for a loan, APRs can be high and there’s usually no grace period, so interest starts immediately. You may also incur additional fees from your credit card company. You will need to already have a credit card with the financial institution to use this option.
Payday alternative loans (PALs). Offered by federal credit unions, payday alternative loans (PALs) are specifically designed to provide a safer substitute to payday loans. To qualify, you usually need to be a credit union member for at least a month. PALs typically feature loan amounts from $200 to $2,000 with one- to 12-month repayment terms. APRs are capped at 28%. This is higher than New York’s APR cap because federal credit unions are exempt from state usury limits, which seem to unfairly benefit the lender.
Local assistance programs and charities. If you’re facing a financial emergency, don’t overlook local nonprofits or government assistance. To find out if you qualify, visit the
New York myBenefits website, which covers various programs, including Temporary Assistance (TA) and Supplemental Nutrition Assistance Program (SNAP). You can also visit
ACCESS NYC to see if you are entitled to cash.
Earned Wage Access (EWA) apps. EWA apps allow you to access a portion of your earned wages before payday without interest or mandatory fees. Think of it as getting paid for the work you’ve already done, just a little earlier. These tools give you flexibility without the risk of getting caught in debt.
EarnIn Cash Out can enable you to access up to $150/day, with a max of $750 between paydays. EarnIn does not charge interest on Cash Outs or mandatory fees.
Other
EWA providers include MoneyLion, Varo, and Brigit.
What states allow payday loans?
New York isn’t the only state that prohibits payday loans. They are also illegal in Arizona, Arkansas, Connecticut, Georgia, Maryland, Massachusetts, New Jersey, North Carolina, Pennsylvania, Vermont, and West Virginia.
Although payday loans are legal in other states, payday lending laws vary from state to state. In many states, they are very tightly regulated. For example, Ohio caps APR at 28% with a maximum loan term of 90 days. Illinois enforces a 36% APR cap under the Predatory Loan Prevention Act, and Colorado also limits APR to 36% and requires loans to be repayable over at least six months.
However, some states still allow payday loans with few or no restrictions: Idaho, Nevada, Texas, Utah, Wisconsin, and Wyoming have no APR caps; and Alabama, California, Hawaii, and Kentucky permit APRs of 400% or more.
How EarnIn can be a safer alternative for quick cash
Payday loans might seem like a quick fix, but they can come with sky-high fees, aggressive collection tactics, and a strong risk of falling into debt.
If you want a more responsible, transparent way to access money, take a look at whether EarnIn could be a better alternative. EarnIn’s
Cash Out tool allows you to access up to $150/day with a maximum of $750 between pay periods. There are no credit checks, no interest, and no mandatory fees.
Cash Out is not a loan. It’s your money, accessible when you need it.
FAQs
Can a complaint be filed about a payday lender in New York?
Why are payday loans so expensive?
Payday lenders can charge so much because they operate in a market where borrowers have very few — if any — other options. This situation gives lenders disproportionate pricing power, which they often exploit. Lenders argue that high fees are justified because their borrowers are riskier. However, many payday borrowers are trapped in cycles of repeat borrowing, a scenario that provides high incomes for payday lenders.
Are auto title loans legal in New York?
Yes, auto title loans are also illegal in New York. An auto title loan is a short-term, high-interest loan where the borrower uses their vehicle title as collateral. These loans are considered just as predatory as payday loans — with the added risk of losing your vehicle.
Can you get an out-of-state payday loan online if you live in New York?
You can’t circumvent payday lending laws by applying online for a payday loan from a company in a state where they are legal. When you apply for a loan, you must provide your home address. You are subject to the laws of the state where you reside, not the state where the lender is located. Any lender who doesn’t abide by these regulations shouldn’t be trusted.
Please note, the material collected in this post is for informational purposes only and is not intended to be relied upon as or construed as advice regarding any specific circumstances. Nor is it an endorsement of any organization or services.
This Blog was sponsored by EarnIn. While the author received compensation, the information shared is grounded in independent research and intended to provide helpful and accurate guidance to readers.
EarnIn is a financial technology company, not a bank. Banking services are provided by our bank partners on certain products other than Cash Out. A pay period is the time between your paychecks, such as weekly, biweekly, or monthly. EarnIn determines your daily and pay period limits (“Daily Max” and “Pay Period Max”) based on your income and financial risk factors as outlined in the Cash Out Maxes section of our Cash Out User Agreement. EarnIn reserves the right to adjust the Daily Max and Pay Period Max at its discretion. Your actual Daily Max will be displayed in your EarnIn account before each Cash Out. EarnIn does not charge interest on Cash Outs or mandatory fees for standard transfers, which usually take 1–2 business days. For faster transfers, you can choose the Lightning Speed option and pay a fee to receive funds within 30 minutes. Lightning Speed may not be available at all times and/or to all customers. Restrictions and terms apply; see the Lightning Speed Fee Table and Cash Out User Agreement for details and eligibility requirements. Tips are optional and do not affect the quality or availability of services. 
