Payday loans have gotten a bad rap, and deservedly so. Payday lenders have behaved in a predatory manner. However recent payday loan rules and regulations have eliminated some of the worst abuses. While a payday loan should be no one’s first choice, when used properly, for the short-term only, a pay day loan may be better than missing out on an opportunity or avoiding a problem. So, are Colorado payday loans legal and are they a good idea?
Colorado Payday Loans Law
Coloradoans passed Proposition 111 during the 2018 elections. That law capped the interest rate on payday loans at 36%. Colorado law also sets a payday loan maximum in Colorado of $500. In addition, lenders may only charge financing fees up 20% for the first $300 and $7.50 for each additional $100 loaned. The law also limits the interest rate on loan renewals in Colorado to 45%. Only one rollover is allowed. If your repayment does not go through due to non-sufficient funds (NSF), the maximum fee is $25. The minimum term on payday loans in Colorado is six months, but you should pay it off sooner to avoid accumulating more interest. All Colorado payday loans laws apply to online lenders as well.
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Of course, all payday lenders must comply with any applicable federal laws and regulations as well.
Legal Colorado Payday Loan
Legal payday loans in Colorado are available from numerous lenders. Pawn shops, or so-called money stores are some of the most common payday lenders in Colorado.
Are Payday Loans in Colorado a Good Idea
Whether it’s Denver, Fort Collins, Colorado Springs, or Boulder, payday loans are often misused by borrowers. It is important to fully understand how payday loans work, and why they should only be used as a last resort, and only for short-term loans. The best payday loans are those that are used to bridge the gap of money you already have coming. For example, if you need $200 on Wednesday to keep your power from being turned off, but you have a $2,000 paycheck coming next week, then a payday loan is better than getting your power turned off, paying a reconnect fee, taking time off of work to get it turned back on, and so on.
Payday loans are a very bad idea for long-term, or for when you do not have the money to pay it back and will not have the money to pay it back. Taking out a $300 payday loan may seem like a good idea, but if you cannot pay it back, the fees and interest can add up quickly. If you think paying $300 off is hard, imagine trying to pay off $500, or even $600 from using a payday loan for a longer term and rolling the payday loan over while incurring more fees and interest.
As with all financial products, there is a use for a payday loan, but it is not right for everybody, and it is not right in almost all situations. Avoid payday loans whenever possible and only use them as a last resort when you know that you will be able to pay back the loan. If you cannot pay the loan back within one week, do not take out the loan. Instead, use the time that you would use to get a payday loan to research other solutions including bank loans. There are programs that help with utility bills, and places that help with food insecurity. If you are having financial troubles with no way out, talk with a financial counselor. If necessary, consult an attorney about your possible debt relief options. All of these are better than keeping a payday loan for months.