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Once you have repaid a payday loan, most lenders and US states have what is called a ‘cooling off period’ which is a period of one to seven days before you can take out another loan. This is something that is enforced by US law and varies between US states.

The idea behind this is that people do not become reliant on high cost payday loans and have a moment to assess their financial situation and perhaps look at alternatives.

Whilst payday loans offer an effective way to borrow money fast, they carry higher interest rates than the average financial product, with APRs typically around 200% to 400% APR depending on the state you are in and other factors such as your affordability and credit score.

Although it is common for American borrowers to habitually take out 5 to 6 payday loans per year, this is not desirable and ideally you should be using these products for one-off emergencies and not something that can continue into a spiral of debt.


Key Points

  • By law, there has to be a cooling period of 1-7 days before taking out a new loan straight away
  • This is designed to protect consumers and stop them being reliant and taking out too many payday loans
  • The rules vary from state-to-state, but it is something that all lenders must adhere to
  • If you still need money after your loan has been repaid, consider alternatives such as credit unions, speaking to a debt professional or selling items that you no longer need


Can I Take Out a Payday Loan Straight After Paying One Back?

Yes, technically you can apply for a payday loan straight after you have paid one off – and depending on how well you paid off the loan, you could be eligible to borrow a higher amount. Or equally, the lender may find that based on running some checks that you are more financially stretched and may only be able to borrow a smaller amount or your loan is declined.

However, something to bear in mind is that there will be a cooling off period of 1 to 7 days, depending on the US state you are in and the lender you are working with, so you may not be able to receive the loan for a few more days. This pause is designed to give you a moment to look at your financial position and avoid taking on extra high-cost debt which may not be helpful for you for your long-term. This would be a good opportunity to look at lower cost alternatives or speak to a professional.


Why Does a Cooling Period For Payday Loans Exist?

Whilst payday loans are very popular with more than 12 million Americans using them every year and they certainly help people looking for emergency loans, they are very expensive forms of credit and it is not recommended to use them over and over again.

With strong regulation in place, lenders across America have to follow any practices to help to protect consumers and stop borrowers from falling into long term debt cycles.

Therefore, it is intended that giving borrowers up to 7 days to evaluate their situation and their requirements, they may be able to seek cheaper alternatives or find more sustainable ways to borrow money.

Does The Cooling Period For Payday Loans Vary Between Lenders and US States?

Yes, the length of the cooling period will vary between which US state you are in and if you are using the same lender again or if it is a new one. Every case could be different.

There are some states which are far more relaxed in terms of the number of loans you can take out and how often you can take them (such as Texas and Nevada) and if you are looking for payday loans in Florida, you may only have a cooling period of 24 hours. Some other states may require you to wait for 7 days before taking out a new loan, so always check with your lender or see the terms and conditions of your last agreement.


How Many Payday Loans Am I Allowed To Have Open?

Depending on the US state, you may only be allowed 1 or 2 payday loans open at any time, but some lenders and states do not have a limit such as Nevada.

The rules may also vary between lenders and the US states, with some legislation saying that you can only have one payday loan open with that specific lender and others allowing you to have multiple loans open with the same lender or across different lenders too.

However, taking on multiple payday loans at any point is not recommended, especially because of the high interest rates that they carry. If you find yourself using one loan to pay off another, this can lead to unhealthy spiral of debt.


What Are The Alternatives To Payday Loans?

If you are currently in the middle of your cooling off period, this could be a good opportunity to consider your alternatives which are lower cost and could help you get out of the debt trap you may be facing:

Credit Unions

Credit unions offer lower cost loans for their members and additional benefits including bank accounts and savings accounts too. If you are a member of a credit union, you can look into applying for some short term finance which could be longer term and cheaper.

Borrowing From Family and Friends

This is the most common form of borrowing and usually comes with no interest rates or applications. There is no doubt that a family member or friend would be able to help you if you are facing an emergency or going through a rough patch. Just always make your repayment expectations clear or it can lead to awkwardness and conflict amongst the people you love the most.

Sell Items You Do Not Need

From old computers, laptops, cell phones, clothes and furniture, you would be surprised how much you can fetch for items around the house that you do not need and this could be a more effective way of raising $1000 or $2000 rather than borrowing that amount through a payday loan and having to almost pay double it back in terms of interest.

Speak To a Debt Professional

There are a number of debt charities and professionals who can help you if you are experiencing long term debt problems. Debt plagues a lot of Americans and it is often not their fault, whether it is as a result of a family emergency, change in health or personal circumstances. There are several agencies and professionals who can help you and get you out of the debt issues you may be experiencing.


Richard Allan

Richard Allan

Richard Allan is the founder of Capital Bean and a passionate writer about personal finance, budgeting and how to save money at home and work.

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