Beginner’s Guide to Applying for Payday Loans in California

Where you live and where a loan is issued can vary greatly from state to state. And aside from the regulations that came down via the Truth in Lending Act (TILA), the federal government doesn’t get all that involved when it comes to lending processes. This leaves states to determine any rate caps and other allowances or restrictions when it comes to lending. 

This can make it confusing for borrowers who may move across state lines, or seek a loan that is funded in a state other than where they live. In this article, we’ll try to simplify the process and let you know what you need to be aware of when applying for payday loans in California.

Important California Payday Loan Requirements and Consumer Protections to Know

Before we get into the specifics of California, let’s talk about what a payday loan is. A payday loan allows you to borrow a small amount at a higher interest rate than what you might be able to receive with a more traditional lending option. 

Typically, the loan amount is a portion of the borrower’s next paycheck. Payday loans provide a quick and convenient way to access funds for immediate financial needs. These loans are designed to help cover unexpected expenses or temporary financial shortfalls until the next payday. The simplicity of the application process and the quick access to funds—even for those with less—than—perfect credit—make payday loans a practical solution for many.

Here are several reasons why people might choose payday loans over more traditional lending options, particularly for California payday loans:

• Speed: Approval processes are fast, often within minutes.


• Convenience: Applications can be completed online without needing to visit a bank.


• Fewer Requirements: Generally, payday loans require fewer qualifications than conventional loans. You may only need a copy of your driver’s license.


• Credit Flexibility: These loans are accessible to those with poor or no credit history.


• Emergency Access: Ideal for urgent financial needs like unexpected bills, medical expenses, car repairs, etc.

What You Need to Know about Payday Loans in California

Now that you know what a payday loan is, let’s talk about what you need to know if you want to apply for a loan in California. California payday loans are regulated under specific laws to protect borrowers and ensure fair practices. Here are some critical points you should know when applying for a California payday loan:

Loan Amount Limits

While the State of California does not impose a maximum amount a consumer can borrow on a payday loan, it does require that the maximum amount of a payday loan check shall not exceed $300, including any fees. At Cash Loans Direct, we provide payday loans up to $255 (subject to credit approval).

Fee Caps

The State of California requires that a payday loan fee not exceed 15% of the check’s face amount. 

APR

The State of California does not impose a maximum Annual Percentage Rate (”APR”) for payday loans. However, the 15% fee that you pay for the loan is required to be expressed as an APR. Specific APRs will vary based on the fee a company charges and the length (“term”) of the loan. With most payday loans, companies usually charge a flat fee so, the shorter the term, the higher the APR. 

The Annual Percentage Rate (APR) for a short-term payday loan is significantly higher than that of other types of loans, such as auto loans, which typically have an APR between 4% and 7%. A 15% payday loan fee translates into an APR of about 460% for a two-week loan. 

At Cash Loans Direct, a payday loan costs approximately $17.65 per $100 borrowed. For example, a $100 loan due in 14 days would have a total repayment of $117.65 and has an Annual Percentage Rate of 460.16%. A $100 loan due in 30 days would have a total repayment of $117.65 and has an Annual Percentage Rate of 214.74%.

• Military Protections: Additional fee restrictions apply to military service members and their dependents, reflecting broader efforts to protect more vulnerable populations from potentially predatory lending practices. This is part of the Military Lending Act, which prevents active duty military members, spouses, and certain dependents from being assessed more than 36% MAPR (Military APR). Due to the requirement of expressing a 2-week loan as an ANNUAL percentage rate, this effectively prevents active duty military members from obtaining payday loans.

Here are additional important aspects to consider regarding payday loans in California:

• Licensing: All payday lenders operating in California must be licensed by the Department of Financial Protection and Innovation (DFPI). Always verify a lender’s licensing through the DFPI website to ensure they are legitimate and compliant with state laws.


• Single Loan Limit: Lenders can only issue one payday loan per customer at a time. This rule prevents the accumulation of debt from multiple loans.


• Rollover Restrictions: California law prohibits rollovers, where a new loan is used to pay off an existing loan, which can lead to a cycle of debt.


• Consumer Rights: If a check used to get a payday loan bounces, the lender can charge a one-time fee of up to $15. They cannot charge additional fees if you request an extension of your loan (”Payment Plan“), although they are not required to provide one. As a note, Cash Loans Direct does not offer a Payment Plan for CA payday loans.

Things to Remember when Applying for Payday Loans in California 

There are some things to know if you are applying for a short-term loan with Cash Loans Direct or any other lender. These tips can also be helpful when choosing a payday loan or even a more traditional loan with another lender. 

• Ability to Repay: Consider your ability to repay when taking out a loan. Your loan agreement is legally binding, and you are responsible for fulfilling the outlined loan terms.


• Assess Your Budget: No matter what type of loan you are considering, always take time to assess your budget. And if you don’t have a budget, get one in place. This process can ensure you have the means to pay your loan on time and not sacrifice payments to other lenders and creditors that you already have.


• Prepare Your Documentation: Before you apply, take the time to gather the documentation necessary for your application. Most payday lenders in California will require a copy of your driver’s license or other state-issued identification card. You will also need to provide proof of income.


• Know the Laws: Take some time to review the California payday loan requirements in advance. This ensures that no surprises come up along the way and that you are aligned with the state laws and the lender’s requirements.

Get Started Today with a Payday Loan from Cash Loans Direct

If you need help covering your expenses from now until your next payday, a California payday loan can help. Apply now to get started. We look forward to helping you, every step of the way.