Payday loans can provide fast access to cash when financial emergencies arise before your next paycheck. But are they the right option for you? This comprehensive guide covers everything New Hampshire residents need to know about payday loans, alternatives, laws, risks, and more.
What are Payday Loans?
Payday loans are a type of short-term, high-interest loan designed to provide quick cash until the borrower’s next paycheck. Also known as cash advances, payday loans range from $50 to $500 and must be repaid in full on the borrower’s next pay date, typically within 7 to 31 days.
To obtain a payday loan, the borrower provides a postdated check or electronic debit authorization for the loan amount plus a finance fee. This gives the lender security that the loan will be repaid. On the due date, the borrower can allow the check or debit to be processed, return to pay in cash, or extend the loan for an additional fee.
Payday loans target borrowers who need immediate cash and cannot access more traditional lines of credit. Because no credit check is required, they appeal to individuals with poor credit or no credit history. However, the fees and interest rates associated with payday loans are exceptionally high compared to other loan products.
This type of financing is meant to be a short-term solution for an urgent cash shortage, not a long-term credit option. Unfortunately, many find the loans difficult to repay and become trapped in repeat borrowing cycles, accruing significant debt.
Payday Loan Terms and Conditions
Loan Amounts
In New Hampshire, payday loan amounts are capped at $500 or 25% of the borrower’s gross monthly income, whichever is less. This helps limit loan sizes to what borrowers can reasonably afford to repay.
Fees and Finance Charges
New Hampshire regulates payday loan fees and charges:
- Maximum loan term is 30 days
- Finance charges cannot exceed 15% of the loan amount
- Only one outstanding loan is permitted per borrower
For example, on a $400 loan repaid in 14 days, the maximum finance charge would be $60 (15% of $400). This equates to an APR of well over 400%.
Late fees and nonsufficient fund (NSF) fees may also apply if repayment is late or the postdated check bounces. These additional costs can quickly multiply the true cost of a payday loan.
Repayment
The loan principal and finance fee must be repaid in full by the end of the loan term, typically on the borrower’s next pay date. Options to repay include:
- Allowing the postdated check or debit authorization to be processed
- Returning to the store with cash to repay
- Extending the loan term for an additional 15% fee
If unable to repay, the borrower must pay only the finance fee to extend the loan another 14 days. However, New Hampshire prohibits more than one renewal per loan. Borrowers who cannot repay in full after 30 days must be offered an extended repayment plan at no extra cost.
Eligibility Criteria
To qualify for a payday loan in New Hampshire, applicants must:
- Be 18 years of age or older
- Have an active checking account
- Show proof of income with pay stubs, benefits statements, etc.
- Provide valid government-issued photo ID
- Not have any other outstanding payday loans
Since payday lenders do not check credit reports, borrowers can qualify regardless of credit history. However, applicants must demonstrate income sufficient to cover repayment, usually by presenting recent pay stubs.
Self-employed, part-time, or gig workers can also provide bank statements showing regular cash deposits in order to verify income.
As long as eligibility requirements are met, the lender will quickly approve the loan and cash can be obtained as soon as the same day. This makes payday loans appealing for those who need money right away.
How to Apply
Applying for a payday loan is a quick and straightforward process, especially for storefront locations. The steps are:
- Locate a payday lender either online or in your local area. New Hampshire law requires all payday lenders to be licensed.
- Provide your contact information and bring identification, proof of income, bank account details, and a voided check.
- Complete the simple one-page application, specifying the loan amount desired.
- Sign the loan agreement and debit authorization. The lender will review and approve on the spot.
- Once approved, you immediately receive the loan amount in cash, on a prepaid card, or via direct deposit into your bank account.
The entire in-store process often takes less than 30 minutes. Online payday loans can be funded within one business day of approval.
Proceeding with Caution
While accessing cash quickly may seem appealing, there are a few cautions to consider before taking out a payday loan:
Cost – The fees equate to extremely high APRs of nearly 500% on average. Interest accrues daily and is due in full within 30 days. This makes costs balloon very quickly if not repaid as agreed.
Risk of Fees – Beyond the finance charge, late fees, bounced check fees, and bank NSF charges can accumulate if you miss repayment. Even a single missed payment can double your total loan cost.
Single Balloon Payment – Most borrowers cannot afford to repay the full principal and interest in one lump sum and end up rolling over or extending the loan, incurring additional fees.
Alternatives Available – More affordable loan options may be available via banks, credit unions, friends/family, credit cards, or employer assistance programs.
Impact on Other Bills – Prioritizing a payday loan repayment could mean lack of funds for other bills, potentially triggering additional late fees.
While legal and regulated in New Hampshire, payday loans are complex financial instruments. Consider your budget carefully and only use them as a very short-term solution for emergency cash shortfalls.
Payday Loan Alternatives
Before turning to high-cost payday loans, explore some lower-cost borrowing options:
Banks/Credit Unions – Many offer small personal loans and lines of credit with much lower rates for qualified borrowers. Minimum credit scores and income requirements apply.
Credit Cards – Cash advances typically carry high interest but lower costs than payday loans. Only use if you can pay off in full quickly.
Friends or Family – Asking loved ones for help can provide interest-free loans or gifts to get through difficult times. Agree on repayment terms upfront.
Employer Loans/Advances – Some companies provide advance pay or emergency loans at low interest rates as an employee benefit.
Payment Plans – Work directly with service providers and creditors to arrange installment plans for bills you can’t currently cover in full. Most will waive late fees when agreed upon upfront.
Credit Counseling – Get help managing debt, creating a budget, negotiating lower payments, and improving your credit. Many non-profit credit counseling agencies provide low or no-cost services.
If these options aren’t viable, only use payday loans as a very temporary lifeline in true emergencies. Shop rates carefully and borrow only what you can realistically repay with your next paycheck.
The Risks of Payday Loan Debt Cycles
While marketed as short-term products, data shows the majority of payday loan borrowers become trapped in long-term debt cycles, unable to repay the loan principal and ever-accumulating fees.
This happens when the borrower cannot afford the balloon payment due at the end of the loan term. They can either default, triggering penalties and collection calls, or renew the loan for an additional fee. Many repeatedly roll over loans for months, paying far more in fees than the original borrowed amount before eventually defaulting.
In New Hampshire, the law prohibits more than one renewal per loan. After 30 days of nonpayment, the lender must offer an extended repayment plan at no extra cost. However, borrowers still often struggle to stick to the new plan and escape the debt trap.
Warning signs of a debt cycle include:
- Renewing or rolling over loans repeatedly
- Borrowing to pay existing debts instead of new expenses
- Taking out multiple concurrent loans
- Increasing loan amounts each period
- Prioritizing loan payments over other bills
- Inability to pay living expenses between paychecks
If you find yourself depending on payday loan borrowing each month, it is important to seek help restructuring debt payments through credit counseling or debt management resources. Cutting living expenses, budgeting carefully, and seeking additional income can also help end reliance on short-term loans.
Payday Loan Restrictions in New Hampshire
New Hampshire regulates payday lending under RSA 399-A, the New Hampshire Small Loan Act. Oversight is provided by the New Hampshire Banking Department.
Key restrictions include:
- Licensing – All lenders must obtain a state license annually. Only licensed lenders can operate in NH.
- Loan terms – Maximum 1 month (31 days). One renewal allowed per loan if borrower is unable to repay.
- Fees – Capped at 15% of the loan amount. Late fees cannot exceed $20. No other charges or fees allowed.
- Loan amounts – Maximum loan is $500 or 25% of gross monthly income, whichever is less.
- Repayment – Extended repayment plans must be offered after 30 days of nonpayment. No extra fees can be charged.
- Right to rescind – Borrowers can rescind a payday loan by 5pm the next business day with no fees.
- Rollovers prohibited – More than one renewal per loan is not allowed. Rollovers imply new loan fees each period to keep old loan active.
- Concurrent loans banned – Only one payday loan at a time per borrower is permitted in NH.
- Collections – Lenders cannot press criminal charges against borrowers for defaulted payday loans.
- Database – Lenders must verify applicants do not have existing payday loans using a state database.
These restrictions help limit some of the predatory lending practices seen in states with looser regulations. However, as payday loans carry APRs exceeding 400%, borrowers must exercise caution when using these high-cost credit products.
Payday Loan Scams and How to Avoid Them
Alongside licensed lenders, there are also illegal, predatory payday loan operations in New Hampshire. Scam lenders use deception and false promises of guaranteed approval to take advantage of financially vulnerable consumers.
Warning signs of a payday loan scam:
- Requests for upfront fees before approving the loan
- Unsolicited offers from lenders you didn’t contact
- Requests for bank login or account access
- Claims of no credit check required
- Guarantees or promises of loan approval
- Lack of licensing with the NH Banking Department
Only provide sensitive information and deposit funds to reputable lenders. Research companies thoroughly and report suspicious activity to the authorities. Legitimate lenders will never ask for upfront fees before you receive the loan funds.
Key Takeaways: Using Payday Loans Responsibly
- Only borrow what you can realistically repay in full on your next pay date
- Have a plan to cover repayment without taking out another loan
- Avoid offers that seem too good to be true
- Consider more affordable alternatives when possible
- Never provide bank account access or upfront fees
- Use sparingly for true emergencies and avoid debt cycles
- Seek help from credit counseling if struggling with repayments
Payday loans can assist in solving short-term cash crises but come with caveats. When used judiciously as a rare last resort, they can be managed responsibly and effectively.
Frequently Asked Questions about Payday Loans in New Hampshire
Q: What are the repayment options if I can’t afford to pay off my payday loan in full?
A: New Hampshire allows one free renewal extending the due date by 14 days. After 30 days of nonpayment, the lender must offer an interest-free extended repayment plan. Seek options like this to avoid default or collections.
Q: How long do payday loans stay on your credit report in NH?
A: Payday lenders typically do not report to credit bureaus. Unless you default and are sent to collections, the loans themselves don’t show up on reports. However, repeated reliance on payday loans signifies underlying financial issues that impact your creditworthiness.
Q: Can payday lenders sue borrowers in NH for nonpayment?
A: No, criminal charges cannot be pressed over defaulted payday loans. However, civil lawsuits, damage to your credit, and aggressive debt collection efforts are permitted within the confines of state and federal law.
Q: What if I can’t repay my NH payday loan at all?
A: Communicate with the lender early and honestly. See if they will agree to a payment plan or settlement for less than the full balance. Consider credit counseling to negotiate debt and develop a sustainable budget. Bankruptcy is a last resort option but discharges payday loan debt.
Q: Are online payday loans legal in New Hampshire?
A: Yes, online lenders licensed with the state can legally offer payday loans to NH residents. Borrowers enjoy the same rights and protections as with storefront lenders. Be wary of unlicensed or offshore operations. Research lenders thoroughly before providing personal information.
Let me know if you need any clarification or have additional questions!