If I owe a payday loan, can I get another? Yes, but you probably shouldn’t

A common question anybody struggling with payday debt has asked is ‘Can I get another payday loan if I already have one?’.  The short answer is that yes, you usually can get another payday loan.  However, it will likely not be from the same lender, and will be on worse terms.

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A quick summary:

  • The law doesn’t prevent lenders from giving out multiple PDL loans
  • Sometimes lenders won’t give out a second loan if you already have one
  • The more loans you get, the worse the interest rate. And the more likely you are to fall into the payday loan trap
  • There are a number of alternatives to additional payday loans, such as consolidation programs

Read Also: How to Consolidate Payday Loans into One

The data: most borrowers have more than one payday loan

According to data from Debthammer, the average payday borrower has 2.8 loans on average. Below, you can see the percentage of borrowers by the number of loans they have.

Source: DebtHammer.org

So the short answer is yes, lots of people are able to get multiple PDLs.

Laws don’t prohibit multiple PDL loans

Payday loans – also called short term loans, cash advances, and small personal loans – are mainly regulated by state law.  Payday lending is illegal in 15 states and the District of Columbia, but is legal in the other 35 states.

States with no loan limits

Some states have no loan limits.  In Texas for example, there is no legal limit to the amount a pay lender can give you.  They could give you a loan for $100,000 if they wanted to (which obviously they wouldn’t).  

So if you already have a $500 loan, the same lender or any other lender could give you another $500 loan.

States with loan limits…you can still get a second loan

In Virginia, for example, the maximum loan amount is $500.  But that does not mean you can only borrow $500.  All this means is that any individual lender can only give you $500.

They can and will allow you to rollover your loan if you can’t pay at the due date.  There may be additional fees associated with these.  But they can’t increase your initial loan amount.  

If you have a $500 loan from Speedy Cash, there’s nothing prohibiting Ace Express from giving you another $500 loan.  

So even in states that have a loan limit, you can get a second payday loan.  It just has to be from another lender.

Online lenders often break the laws

If you go into a storefront payday lender, they are likely following the laws.  Yes, they might be predatory scumbags, but they probably have a license with the state.

However, once you go online, it’s the wild west.  Some online lenders play by the rules, but many do not.  Many of the online lenders are based offshore or on Indian reservations (see this post on Tribal loans for more info).

These lenders may not have a license, and they use loopholes like Tribal immunity to break the laws.  There is nothing – even the law – stopping them from giving you a second payday loan even if you already have one.

Will a lender give you another loan?

So yes, the law allows you to get a second payday loan if you already have one.  But that does not mean a lender will give you a second loan.  

Before a lender gives you a loan, you give them permission to do a credit check on the loan application.   When they do this, the credit bureaus report how many loans that you have.  Remember, the credit bureaus know everything about your transaction history.  They know exactly how much debt you have.  Then, they make a judgement on whether they think you can repay it or not.

If a lender sees that you already have a loan, they may or may not give you a second one.

If a lender sees that you already have two loans, they are even less likely to give you another one.

If a lender sees you have five payday loans, they are much much much less likely to give you a sixth.

So the more payday loans you have, the less likely you are to get another one.

The more loans you have, the worse the terms

Before you think about taking a second, third or fourth cash advance loan, you should think about the terms of the loan.  

Because lenders have your credit report, they already know if you have loans out.  They know the types of loans, the loan terms, and other nitty gritty of the loan agreement.  They also know your credit score and credit history. 

When they see you already have loans out, they see you as riskier and more desperate.  This means that they will charge you higher interest rates than your first loan. 

The more loans you have, the worse the interest rates and fees are going to be.  The annual percentage rate of your second loan will almost definitely be worse than your first loan. 

If you’re looking for a second payday loan because you think the first one is bad, don’t expect things to get better.  

You should assume that every additional payday loan you get will have worse terms than the previous loan.

Should you get a payday loan if you already have one?

If you don’t pay back your payday loans, things can get ugly because of the high interest rate.  You end up with a mountain of debt.  It’s called the payday loan trap for a reason.

Before you know it, you have debt collectors blowing up every phone number you’ve ever had.  Nonpayment fees.  NSF fees.  Your bank account is drained.  Overdraft fees on your checking account.  Every collection agency on your tails.  All because you meant to borrow some money to pay back your next payday.

So, if you already have a payday loan, you should consider every alternative before you take out another.

Alternatives to additional payday loans

Fortunately, there are a number of alternatives to taking out additional loans if you need to make ends meet.

  • Credit Unions:  Often credit unions and similar financial institutions will offer small loans at much lower rates.  Sometimes these are called debt consolidation loans.
  • Credit Counseling: Credit counselors can offer legal advice help you get on a debt management plan.  Some will offer financial products that help with this.  They may negotiate with your lender for better terms and offer personal finance advice on how to budget or how to improve your credit score.
  • Renegotiate Payment Plans: Instead of taking out another loan, call your lender and ask for better payment terms.  They aren’t the friendliest, but they do want their money back.    
  • Credit Card Balance Transfer: Credit cards have a much lower APR than a typical short term loan.  Many credit cards are meant for those with bad credit. If you can get a balance transfer with 0% APR, even better.
  • Ask a Family Member for Help: Nobody likes asking friends and family for money, but avoiding the payday loan trap is worth it.  Ask your friends and family for a loan before taking out additional payday loans.
  • Loan Consolidation Programs: There are a number of payday relief programs that help negotiate the total debt burden down for those struggling with payday debt.

Sources:

The Consumer Financial Protection Bureau (CFPB)

Texas State Law Library

Virginia State Law Library

New York Times