Colorado does allow online payday loans, but they limit the APR a lender can charge to 36%.
Every state regulates payday lending differently. Some states ban it entirely, while others put caps on things like interest rates, APR, and loan amounts. Colorado is one state that has recently passed legislation to cap APRs for payday loans at 36%. Which means that payday lenders can offer loans online and in person, but they can’t charge more than 36% APR.
Most payday lenders charge very high interest rates. This is because many of the borrowers who use these products have low credit scores. A low credit score tells lenders that you might not be very trustworthy with money or make your payments on time. Payday lenders are taking on a certain amount of risk by lending to low-credit borrowers, so they charge more money. The problem is that the amount they usually charge in interest rates is very high. So, many states choose to regulate what these lenders can and cannot charge.
The other reason many states regulate these lenders is because the repayment periods are so short that it’s difficult to repay the principal and interest on time. This leads to many borrowers rolling their loans over to a new term. Rollover means the loan is extended, and more interest and fees are added. The practice of loan rollover can lead some borrowers into a cycle of debt that’s not easy to get out of.
These laws and regulations are ultimately a good thing. But they can also make it difficult for low-credit borrowers to get quick cash when they need it. And if you have low credit, you probably already know that it can make getting a loan, credit card, or decent interest rate very difficult. Having low credit limits your financial options and costs more than if you had a better credit score.
Improving your credit score is the first step in getting approved for better loans and better interest rates. Work on paying your bills on time, and lowering your overall debt, and you may start to see your credit score rise.