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Alabama State Payday Loan Laws
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Alabama State Payday Loan Laws

Like many other states, Alabama allows consumers to take out short term loans, also known as payday loans. These loans require repayment in full within a short period of time and have excessively high interest rates on them.

When factoring in that short period of time and the amount of interest, it often equates to triple digital APR interest rates. Nevertheless, many people accept them because they do not have any other options available to them.

History of Use of Payday Loans in Alabama

There is no official date when consumers began having access to payday loans in the state. However, the use of these loans has been present for several decades at least.

About seven percent of Alabama's residents use these loans due to lack of credit. However, when you factor out the costs, this is a very expensive type of loan.

The state does not allow the charge of more than 17.5 percent on these loans. That amounts to $17.50 per $100 borrowed. That may not seem like much, but if you factor in the fact that this is only a two-week loan, it is a very high amount.

In fact, in the state, the annual percentage rate for such a loan is 456 percent! According to records, the average borrower is indebted to these loans for as long as 5 months, due to re-loaning.

What Are the State's Specific Laws?

Alabama payday loan laws are limited. However, the do have some restrictions and limitations in place.

• The minimum term for such a loan is 10 days. The maximum term for such a loan is 31 days.

• The maximum amounted a borrower can obtain is $500.

• The finance charge is no more than 17.5 percent of the loan.

The loan is due and payable no later than the initial period and the length of one rollover. In situations where the borrower is unable to repay the balance in full, the lender can then extend the repayment in a different manner.

Rather than one lump sum, the borrower may make four, equal monthly installments for the remaining balance. If a check is cashed and there are insufficient funds, the lender may then charge an additional fee.

Hands down, Alabama payday loans can be very expensive for any consumer. Though there are laws in place, the amount of repayment for these loans is incredibly hard to swallow for most consumers in such a small amount of time.

And this leads to people getting trapped in a vicious cycle of re-loaning over and over again to pay off other loans. However there are many solutions in place to get people out of this payday loan cycle.

The one program that everyone can qualify for is a loan debt consolidation program. Simply make sure you do your homework when sourcing out companies who offer this program.

Unfortunately there a many loan consolidation scams out there and you certainly don’t want to fall prey to one of those.

Street Talk


Yep I agree - but if someone has no other options it's best to have an idea of what you're getting into.

  about 9 years ago

The laws really do not matter much as these companies have so many loopholes they can use. best to avoid them completely!

  about 9 years ago
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