Unexpected expenses can occur in the worst moment, making people look for various ways to borrow money. Payday loans are one of the most common ways to get extra cash online among Americans. They allow even borrowers with bad credit scores to get approval and receive funds through a direct deposit to their bank accounts the next business day.
However, due to the high risks involved, payday loans are prohibited in many states. Are payday loans legal in Georgia, and what are the alternative short-term loans in GA? Keep reading the article to get answers to all these questions and learn more about various borrowing money options.
According to usury laws and Payday Lending Act, payday loans are generally illegal in Georgia. Payday loans were forbidden in GA in 1955 by the Georgia Industrial Loan Act. Since 2004, small loans have obeyed many rules and regulations.
They can still function if the lender has a Georgia Department of Banking and Finance license. However, there are many restrictions complicating payday lending in Atlanta and the whole of Georgia.
First, a payday lender can’t charge an interest rate higher than 10% on loans of up to $3,000. It protects people from repaying the lenders much more than they originally borrowed.
Rollovers, prepayment penalties, and cooling-off periods are also prohibited, and breaking usury laws is considered a felony in Georgia. If you break the law, you can be punished by jail time. These restrictions helped reduce the number of payday lenders and loan applications in GA and protect people from high-cost payday lending.
The state regulation of the specific state determines the legality of payday lending in the USA. Many states want to protect their residents from losing funds on paying high interest and falling into a cycle of debt and forbid payday lending within their territories. Thus, these small loans are illegal in the following states: South Dakota, New Hampshire, Pennsylvania, Vermont, Montana, Colorado, Arkansas, Connecticut, Maryland, Georgia, Massachusetts, Nebraska, New Jersey, Arizona, New York, North Carolina, and the District of Columbia.
While payday loans in Georgia may be an excellent way to receive money directly to your bank account with no hard credit checks, it is often a risky option for the following reasons:
- High-interest rates – A payday loan is available even for a borrower with a bad or poor credit score, making this option too expensive because of the high interest, which can reach 400% APR (annual percentage rate).
- A cycle of debt – When people need quick cash to cover their emergency expenses, they often borrow funds they can’t repay on time. It results in a debt trap when individuals start taking new loans to return the previous ones.
- Credit score – Payday lenders don’t report to the three major credit bureaus (Equifax, Experian, and TransUnion) to access your credit score. However, your outstanding payday loan can hurt your credit and complicate obtaining loans in the future. Therefore, payday loans in Georgia are not a good tool to build your credit.
One of the main advantages of payday loans over other types of loans is that they are available for all credit scores. Furthermore, they don’t require collateral, protecting borrowers from losing their property or vehicle if they fail to repay the debt. You can get approval for bad credit loans in Georgia, if you have a stable monthly income and can prove it. The most important thing is to borrow cash from reputable and reliable lenders to avoid losing your funds at unaffordable interest rates.
While the Georgia Department of Banking and Finance regulates payday lending, you can borrow money through other short-term loans. They generally have lower interest rates and more convenient repayment terms, making them a safer option.
According to the Georgia Installment Loan Act, installment loans are legal in Georgia. They allow you to borrow more significant amounts with lower interest rates than payday loans. While you may need to pay around 400% APR for a payday loan, for an installment loan, you will be charged from 10% to 36% APR for loans from $200 to more than $10,000.
You can obtain an installment loan from traditional banks, credit unions, or online lenders. Loan providers typically deposit cash directly into your bank account. To get installment loans in Georgia, lenders require borrowers to meet the following requirements:
- Be 18 years of age or older;
- Be a Georgia resident;
- Have an active checking account;
- Have ID;
- Have a phone number and email address;
- Have a stable income.
Another way to legally get a loan in Georgia is to apply for a personal loan from a bank, credit union, or online lender. This loan option is cheaper than payday loans, with a low APR of around 36%, and can be used for various purposes, from paying medical bills to car purchasing.
Unlike payday lenders, personal loan providers require a good credit score from borrowers, conducting a hard credit check. As a rule, borrowers must have a credit score minimum of 620, but you can also find personal loans for people with credit of 300 or even lower. However, be prepared to pay higher interest rates and have a sufficient monthly budget to cover your loan amount with interest and prove your creditworthiness.
Cash advance apps are an excellent option for Georgia residents to get a loan amount from $20 to $500. Unlike Georgia payday loans or other expensive loan options, they allow borrowers to avoid paying high interest.
Cash advance apps don’t charge borrowers an interest rate, unlike other lending options, making them a cheaper way to get money. You only need to pay a subscription fee for most apps, which generally costs $1-$10.
However, cash advance apps typically require repayment by the borrower’s next payday, which is often too short.
Payday loans are often costly, so borrowing from your credit card may be an excellent option. A credit card cash advance is cheaper than a payday loan, offering an average interest ranging from 16% to 18%. However, the interest can vary depending on your credit score. The better your credit score, the lower your interest will be charged.
Community resources and assistance programs are an excellent way to get the necessary loan amounts if you are in a difficult financial situation and payday lending and other borrowing options don’t suit you.
You can get financial support through nonprofit associations, churches, or social services organizations to cover all the necessary expenses without paying high interest or expensive fees.
If you are a credit union member, you can apply for various loans through your financial institution instead of using payday lending. Federal credit unions generally offer lower interest rates of up to 10,24% and more convenient loan terms, which can reach 10 years. Depending on the specific financial institution, they allow their members to borrow significant loan amounts, from $500 to $500,000. If your request is approved, they deposit the funds to your bank account through a direct deposit, which typically takes several business days.
A payday alternative loan (PAL) is a cheaper and more flexible short-term loan than a standard payday loan. PAL lenders conduct a soft credit check, focusing on the information about your employment and bank accounts instead of your credit score. If approved, you will get the funds in your checking account through a direct deposit within one or two business days.
Working with a nonprofit credit counseling provider is an excellent option if you don’t have sufficient knowledge in the loan area. They can help you improve your personal finance management skills and solve your current financial problems. It can result in improving your debt-to-income ratio (DTI) and credit score.
Financial literacy is another tool that can help you solve your financial problems without applying for a payday loan. The more books, articles, or Internet sources you read, the more likely you are to cover your expenses without paying online lenders.
When looking for an answer to the question “Are payday loans legal in Georgia?” it is essential to consider the interest rate and the loan amount offered by the lender, and other factors specified in the state law of Georgia. Furthermore, payday lenders often charge people too high interest and offer inconvenient loan terms, requiring repayment of the loan by the borrower’s next paycheck. Therefore, we recommend considering other borrowing options before applying for payday lending.
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