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How Could Changes To Minnesota's Payday Lending Laws Affect You?

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If you're a resident of Minnesota and sometimes have trouble floating large expenses that hit between pay periods, you may have already taken advantage of the short-term, high-interest loans offered by payday lending companies. Indeed, these loans are available for nearly any borrower with a job -- regardless of credit history -- and can provide you with cash in hand the same day you apply for a loan. However, efforts to reform the payday lending industry in Minnesota have placed limitations on these loans that are not often seen in other states. Read on to learn more about recent changes to the laws governing payday lenders in Minnesota and how these can affect your ability to take out a short-term loan.

What recent changes were made to Minnesota's payday lending laws? 

In 2014, the Minnesota legislature passed a law that attempted to prevent consumers from using payday loans to dig themselves deeper into debt. These reforms included limitations on the number of payday loans an individual borrower could take out in one calendar year (capping this number at 4 payday loans annually) and required lenders to run credit checks on potential borrowers to ensure these borrowers were not in default on other loans.

While these changes to the law primarily altered the way many brick-and-mortar Minnesota payday lenders structured their businesses, they also affected the ability of online payday advance lenders to offer certain types of loans to Minnesota residents. While some lenders argued that the state's attempt to interfere with payday loans offered by out-of-state lenders was an unconstitutional interference with interstate commerce, in 2015 the Minnesota Supreme Court disagreed -- holding that these reforms were constitutional as long as they applied only to residents of Minnesota. 

What are your options if you're in need of a loan that is now prohibited by these regulations?

For situations in which you don't have the credit to qualify for a payday loan, have already hit your annual maximum of 4 payday loans, or need additional cash before you're able to repay an outstanding payday loan, there are still several options that can help provide you with the cash you need within a business day.

  • Payday loan refinancing

In an attempt to help consumers free themselves from a cycle of debt and get back on track with a realistic budget, some Minnesota lenders are now offering payday loan refinancing at competitive interest rates. By refinancing an existing loan, you'll usually be able to secure a lower interest rate and may even be able to take out additional cash by extending the repayment period to a longer term than usually permitted for traditional payday loans. To take advantage of this option, you'll likely need to provide more documentation than needed for a payday loan, so be sure to check the lender's requirements before making the trip (particularly if you need cash immediately).

  • Title loan

If your assets include a paid-off vehicle, you may be able to tap into your car, truck, or SUV's equity by taking out a title loan. Much like the amount you can receive through a payday loan is based on your weekly or monthly wages, the amount you can receive through a title loan is based on the value of your vehicle. In exchange for receiving a portion of your vehicle's value in cash, you'll sign over your vehicle's title to the lender until the loan (plus applicable fees and interest) is repaid. Because failing to repay a title loan could lead to the seizure or repossession of your vehicle, it's important to take out these loans only if you can afford them (or have an alternate form of transportation).