The State of Colorado allows payday loans, but did put some restrictions on the rates charged and the duration of the loan. If you are in Colorado and need a payday loan, then there are a few key points that you will want to keep track of. Below is our summary of the changed to the payday loan industry in Colorado according to their most recent legislation passed:
- Amount Allowed to Borrow: $500
- Origination Fee Allowed: $75
- Duration of Loan (how long you have to pay it off): 6 months
- Bounced check fees allowed:
- Maximum Interest Rate: 45%
- Maximum Monthly Fee: $7.50 per $100
- Extensions/Roll-overs: Since you have at least 6 months to pay the loan back, you should need to worry about roll-overs/extensions
What This Means To You:
Essentially, the main goal of the recent legislation was to help make it easier for consumers to pay back short term / payday loans. By giving you six months time to pay back the loan instead of the 2 weeks time typical with most payday loans, you have an added amount of flexibility which may or may not end up helping you.
Advantages of the Payday Loan laws In Colorado
The main advantage is the flexibility granted by the 6 month time period in which you have to pay back the loan. This means that instead of needing to take out another payday loan in order to pay off your original payday loan in Colorado (and pay new origination fees in addition to having to pay off all the other outstanding fees on your old loan), you instead will incur only additional monthly fees and interest. This can drastically reduce the cost of the loan for those who find they have to continue to roll-over their cash advances/loans as they come due.
Disadvantages of Payday Loans in Colorado
Unfortunately, having the extended 6 months to pay off your loan isn’t all just a bowl of cherries. Yes, you don’t have to pay back the loan in two weeks, but it also means that many people will end up spending more than they otherwise would had they simply taken out a two week loan. For example, let’s say you paid the rates California payday loan lenders are allowed to charge on a two week loan for $500 (they limit you at $300 but we will use $500 for this example to keep it simple). In California you would pay $75 to borrow $500 (you would actually receive $425). In Colorado, you would be subject to the $75 fee PLUS an fees each month. If you didn’t pay the loan back for 6 months, you would end up paying $337.50 in fees to borrow the money. As you can see, you need to be careful and make sure you pay back the loan ASAP. No, the APR for a California payday loan is not that much higher – instead it’s just the actual dollar amount borrowed that is much, much higher – and in the end, what really matters most is how much cash you have to give up in order to get that loan.
Another disadvantage of the Colorado law as it relates to payday loans is that you are limited to $500. If you have an emergency and need $1000 loan fast but you suffer from bad credit, then you will have a much harder time fining the loan in Colorado than you would if you happened to live in Utah.
Resources:
If you want to read the actual bill, you can go here – House Bill 10-1351
If you are struggling with debt, I would recommend talking to the National Foundation for Credit Counseling (NFCC) – http://www.nfcc.org/