Washington State law permits individuals to have one payday loan at a time and limits borrowers to a maximum of eight payday loans within 12 months. Payday lenders must offer a repayment plan that allows the borrower to pay back the loan in installments without incurring extra charges or interest when a borrower takes out four loans in 12 months. Individuals struggling with debt must check alternative options like budgeting, credit counseling, or other loans with lower interest rates.

Understanding Washington State’s Payday Loan 

Payday loans are widely available in the state, according to a report by the Washington State Department of Financial Institutions. Over one million payday loans totaled more than $380 million. The high demand for short-term, high-interest loans has sparked legal requirements and regulations to protect borrowers from predatory lending practices.

A borrower must have an active bank account and proof of income to be eligible for a payday loan in Washington State. Loan terms are limited to 45 days at maximum, with a maximum amount borrowed of $700 or 30% of the borrower’s gross monthly income, which is less. Repayment options include paying off the balance in full on the due date or requesting an installment plan with no other fees.

Table: Washington State Payday Loans Regulations

Loan amountMaximum loan termMaximum amount as a percentage of gross monthly incomeFinance charges
$30045 days30%391% APR
$50045 days30%15%
$70045 days30%10%

Explanation of scenarios, according to UStatesLoans.

Three scenarios have been presented in the table, each representing the maximum loan amount granted, the maximum loan term, the maximum amount borrowed as a percentage of gross monthly income, and the finance charges. The maximum payday loan amount must not exceed $700 or 30% of the gross monthly income, and the maximum loan term is 45 days, according to Washington state law.

The average APR is 391% for a $300 payday loan, which is incredibly high. Finance charges for loans smaller than $500 must be at most 15%, while loans larger than $500 must be at most 10%. Criminal actions are prohibited, and rollovers and extensions are not allowed.

Benefits Of Payday Loans

Payday loans are short-term loans that provide quick access to cash in case of an emergency or unexpected expense. Payday loans offer benefits like fast approval, no collateral requirements, easy qualification, and flexible use of funds. Here are the benefits of payday loans.

  • Fast approval and funding – Payday loans are approved and funded quickly, within hours, which is beneficial in emergencies.
  • No collateral required – Payday loans are unsecured, meaning one doesn’t need to provide collateral like a home or car to secure the loan.
  • Easy qualification – Payday loans have fewer requirements than other types of loans. They do not require a credit check or a high credit score, making them more accessible to people with poor credit or no credit history.
  • Flexible use of funds – Payday loans are useful for various purposes, including paying bills, covering unexpected expenses, or bridging the gap between paychecks.

Risks Of Payday Loans

Payday loans have several risks, including high-interest rates and fees, creating a cycle of debt that is challenging to break, impacting the borrower’s credit score, aggressive collection tactics, and limited regulation. Risks make it challenging for borrowers to manage their finances and have long-term consequences, including financial instability and poor credit. Examine its risks before obtaining a payday loan and explore alternative options.

  • High-interest rates and fees – Payday loans have high rates and fees, making them very expensive. Its costs mount up rapidly, making it much more challenging to repay the loan if one is unable to do so on time.
  • The cycle of debt – Borrowers tempt to get another payday loan if they fail to pay back the previous one on time, which leads to a debt cycle that is hard to escape.
  • Impact on credit score – Other payday lenders report late payments or defaults to credit bureaus, negatively impacting credit scores.
  • Aggressive collection tactics – Other payday lenders use aggressive collection tactics, like calling one repeatedly or threatening legal action if borrowers fail to repay the loan on time.
  • Limited regulation – Payday loans are regulated state-by-state, and other states have fewer regulations than others. It makes it difficult to know if a lender operates legally and ethically.

How To Get A Payday Loan in Washington State?

Getting a payday loan in Washington State involves providing proof of income, a valid ID, and an active checking account. Applicants must search online or visit physical locations of payday lenders and compare their terms and interest rates. The lender deposits the loan amount into the borrower’s bank account within one business day after filling out an application and accepting the loan terms.

Borrowers must authorize the loan to take funds from their bank account and repay the loan with fees and interest on the due date. The longer the repayment period, the lower the monthly payments, but the borrower has to pay more interest over the life of the loan.

  1. Applicants must provide proof of income, a valid government-issued ID, and an active checking account to apply for a payday loan in Washington State.
  2. Search online for payday lenders that operate in Washington State or visit physical locations. Compare different lenders to find the one that offers the most favorable terms and interest rates.
  3. Fill out the application. The application process varies by lender, but applicants must provide personal and financial information, including their name, address, and employment information.
  4. The borrower must accept the loan terms. They must sign the loan agreement electronically if the borrower agrees to the loan terms.
  5. Receive the funds. The lender deposits the loan amount into their bank account after the borrower signs the loan agreement within one business day.
  6. Authorize the loan to take funds from the bank account. Borrowers must repay the loan with fees and interest on the due date. A longer repayment period results in lower monthly payments but more interest paid over the life of the loan.

Alternatives To Payday Loans In Washington State

Several alternatives to payday loans in Washington State include personal loans from banks and credit unions, interest rates, credit card cash advances, borrowing from family or friends, credit counseling, and peer-to-peer lending platforms. Payday loan alternatives provide flexible repayment terms, lower interest rates, and other financial assistance to help individuals manage their finances and not pay high-interest payday loans.

Personal Loan

A personal loan is an unsecured loan that is useful for various purposes and is available from banks, credit unions, and online lenders. Personal loans have a fixed interest rate and repayment term, and the interest rate is based on the credit score, income, and debt-to-income ratio. The flexibility to use the funds for any purpose and the lack of collateral requirements make personal loans an attractive option for individuals who need to borrow a large amount of money.

Credit Unions

Credit unions are member-owned and non-profit financial institutions that offer various financial services, like savings accounts, checking accounts, loans, and credit cards. They are smaller than traditional banks and focus on serving specific communities or groups of people.

The main advantage of credit unions is that they offer lower interest rates on loans and credit cards because their primary goal is to provide financial services to their members rather than generate profits for shareholders. Credit unions are cooperative financial institutions that provide members with various services, including access to loans that borrowers repay in installments over a while.

Credit Card Cash Advance

A credit card cash advance is a short-term loan that borrowers obtain at an ATM or bank using their credit card. The amount that applicants borrow depends on the credit limit of the card and the available cash advance limit. Cash advances are subject to high fees and interest rates, and the interest starts accruing immediately.

There are several advantages to credit card cash advances. The advantage is that they are easily accessible, as borrowers use their credit cards to obtain the necessary cash. Another advantage is that they are useful for various purposes, like covering unexpected expenses or emergencies.

Family or Friends

Borrowing money from family or friends is a useful alternative to payday loans. They offer lower or no interest rates, saving the borrower money. The advantage of borrowing from family or friends is offering more flexible repayment terms, as the lender works with the borrower to set up a repayment schedule that works for both parties. Another advantage is that borrowing from family or friends is a convenient and accessible option. 

Credit Counseling

Credit counseling is a non-profit service organizations offer to help individuals better manage their finances and improve their credit. A credit counselor works with clients to develop a budget, create a debt management plan, and provide education and resources to help clients achieve financial stability.

A counselor reviews a client’s income, expenses, debts, and credit report to identify areas where the client has to make changes to improve their financial situation during a credit counseling session. The counselor negotiates with creditors on behalf of the client to reduce interest rates or waive fees.

Peer-to-peer Lending Platforms

Peer-to-peer lending platforms provide an alternative option for online borrowers seeking installment loans, connecting them with individual investors lending money. Its platforms offer competitive interest rates and flexible repayment terms.

Borrowers must provide information about their income, employment, and credit history to apply for a loan on a peer-to-peer lending platform. The platform uses its information to assess their creditworthiness and assigns them a credit rating.

Frequently Asked Questions

What is the maximum number of payday loans a person can have at once in Washington State?

Washington State caps payday loan borrowers at 8 loans across all lenders at any one time, with a maximum limit of 30% of gross monthly income.

Are there any restrictions on rollovers or renewals of payday loans in Washington State?

Washington prohibits back-to-back transactions or renewals of existing payday loans. Borrowers must wait 1 business day between consecutive loans.

How do lenders and the state enforce the limit on the number of payday loans a person can have simultaneously?

The state maintains a centralized database that lenders must check and report to, tracking payday borrowing activity and blocking loans that exceed limits.

Can I have multiple payday loans from different lenders in Washington State?

Yes, you can have up to 8 simultaneous loans from different licensed lenders in Washington, as long as the combined total does not exceed 30% of gross monthly income.

What are the consequences of exceeding the allowed number of payday loans in Washington State?

Licensed lenders will deny additional payday loan requests once the legal limit is reached. Unlicensed lenders may still extend illegal loans at very high interest rates.

Nastya Mae Vasile

Nastya Mae Vasile

Senior Personal Finance Writer

Nastya Mae Vasile works as a writer who lives in Texas with years of experience as a journalist and Marketing professional. Her latest concentration has been in financial services for consumers and credit scores. Suppose she writes about financial services, personal computers, and enterprise-level software. In that case, she seeks to explain how the products and services are designed to meet the requirements of everyday users and how they are able to get the most value out of the services they offer.