The map shows a typical APR in each state

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In recent months, several states have taken steps to limit interest rates on payday loans to protect consumers from overindulging in these traditionally expensive loans.

In the November general election, voters in Nebraska overwhelmingly voted to cap payday loan interest rates in the state at 36 percent. Before the voting initiative passed, the average interest on a payday loan was 404%, according to the Nebraskans for Responsible Lending coalition.

In January, the Illinois state legislature passed a bill that will also cap consumer loan rates, including payday and car title, at 36%. The bill is still awaiting Gov. JB Pritzker’s signature, but once signed, it will make Illinois the last state (plus the District of Columbia) to put a rate cap on payday loans.

Yet, these low amount loans are available in more than half of the US states without many restrictions. Typically, consumers simply need to walk into a lender with valid ID, proof of income, and a bank account to get one.

To help consumers put these recent changes into perspective, the Center for Responsible Lending analyzed the average $ 300 loan APR in each state based on a 14-day loan term. Typically, payday lenders charge a “finance charge” for every loan, which includes service charges and interest, so many times consumers are not always sure how much interest they are paying.

Currently there are a handful of states (shown here in green) – Arkansas, Arizona, Colorado, Connecticut, Georgia, Maryland, Massachusetts, Montana, Nebraska, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Dakota of South, Vermont and West Virginia – and DC that cap payday loan interest at 36% or less, according to CRL.

But for states that don’t have rate caps, the interest can be exorbitant. Texas has the highest payday loan rates in the United States. The typical APR on a loan, 664%, is over 40 times the average credit card interest rate of 16.12%. Texas’ position is a change from three years ago, when Ohio had the highest payday loan rates at 677%. Since then, Ohio has imposed restrictions on rates, loan amounts and duration that went into effect in 2019, bringing the typical rate down to 138%.

About 200 million Americans live in states that allow payday loans without onerous restrictions, according to CRL. Even during the pandemic, consumers are still looking for these loans with triple-digit interest rates.

The rate of workers taking out payday loans has tripled in the wake of the pandemic, according to a recent survey by Gusto of 530 workers in small businesses. About 2% of those employees said they had used a payday loan before the start of the pandemic, but about 6% said they had used this type of loan since last March.

Although payday loans can be easily obtained in some areas of the United States, their high interest rates can be expensive and difficult to repay. Research by the Consumer Financial Protection Bureau found that almost 1 in 4 payday loans are re-borrowed nine or more times. Additionally, borrowers take about five months to repay loans and cost them an average of $ 520 in finance charges, reports The Pew Charitable Trusts. This is in addition to the original loan amount.

“In addition to repeated borrowing, we know there is an increased risk of overdrafts, loss of a bank account, bankruptcy and difficulty paying bills,” says Charla Rios, researcher at CRL. Other research has shown that the stress of expensive loans can also have health effects, she adds.

“People are currently suffering from financial hardship and we also know the bottom line and the downsides of payday loans, so these loans are not a solution right now,” says Rios.

Check: Nebraska becomes latest state to cap payday loan interest rates

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