How To Know You Are Dealing With An Illegal Payday Loan

When you need fast cash, your mind stops thinking logically. All you need is money and that too quickly. So when you scan the innumerable pages of Google search results, it becomes triple difficult for you to discriminate against legal payday loan companies from illegal ones.

Predatory payday loan companies are ruling the country. These companies use smart advertisements and catchy taglines to trap innocent customers. But they use abusive lending practices and charge excessively high interest on payday loans. Illegal payday loans have astoundingly high-interest rates and short repayment terms. Interest rates are so high and the repayment term is so short that most borrowers are unable to pay off debt.

Most illegal payday loan companies charge between 400% and 500% interest rates, and the repayment term stretches to a maximum of 14 days. If you have borrowed $1000 and the interest rate is 400%, then the lender would charge you $4000 just for the interest. Plus, they would expect you to repay the principal amount as well.

The torture doesn’t end here.

Illegal payday lenders use various tactics to harass debtors, which we will discuss in this post. But first, let us find out the 4 signs that indicate you’re dealing with an illegal payday loan.

4 Signs to know if your payday loan is illegal

  • The lender doesn’t have any contact details: Tell me something. If you’re doing an illegal business, would you like people to track you? Would you prefer to leave any trace? Would you prefer to share your contact details with anyone? Perhaps not. Right? The same applies to illegal payday loan companies also. They are also less likely to display their contact details on their website.
  • The lender is tribal: Tribal payday loan lenders are not legal in the USA. They don’t have the license to do business in our country, and they charge sky-high interest interests. They don’t follow the state and federal laws. The APR on a payday loan shouldn’t be more than 36%. This is the maximum interest rate lenders can charge in most states, and that is because borrowers can afford to pay this rate. But the tribal payday loan lenders charge well above 100% interest rate. In fact, some of them charge above 500% interest rate. Do check out the official website of the tribal lender minutely. If you see that the APR is not listed on the website, then it’s a red flag. You must avoid doing business with them. Read the About Us section of the website carefully. See if they have mentioned anything about belonging to a sovereign tribal community. If so, then stay away from them.
  • The lender doesn’t follow state laws: Payday loan companies have to follow state and federal laws. For instance, in Colorado, the maximum loan amount is capped at $500. If a payday loan company is ready to give you $600, then this means that they have violated the state payday loan laws. In that case, the loan is illegal.
  • The lender threatens to arrest you: When debtors are unable to pay back lenders, they are threatened with dire consequences. Some lenders threaten to arrest debtors for non-payment of debt. Some lenders threaten to seize the properties of debtors. Some even threaten to garnish the wages of borrowers.
  • Find out: Can payday lenders seize assets and do wage garnishment? Sometimes, illegal payday loan companies call employers directly and speak rubbish about the debtor. They do this to scare debtors and ruin their image.


Honestly speaking, payday loans look good only on attractive websites. In reality, they harm your financial life. Illegal payday loan companies are the worst. They drain your bank accounts, give you false threats, ruin your sleep, and leave you shattered. So try to avoid payday loans if you can. Look for other smart alternatives to fast cash when you need money.