Payday loans are legal in Indiana, but they are expensive and tightly regulated. You can borrow up to $605 for a maximum of 14 days. Before you consider one, it is vital to understand the costs and your other options.
How much does a payday loan cost in Indiana?
The cost of a payday loan in Indiana is determined by a tiered fee structure set by state law. This means the fee you pay is not a single percentage of the entire loan. Instead, it is broken into parts.
For example, on a $400 loan:
- The first $250 costs 15%: $37.50
- The next $150 costs 13%: $19.50
- The total finance charge would be $57
This fee structure leads to an Annual Percentage Rate (APR) of 391% for most loans. APR is a standard way to express the cost of a loan over a full year. A high APR shows that a short-term loan is very expensive when its cost is annualized.
| Loan amount | Term | Typical fee | Total cost | APR |
|---|---|---|---|---|
| $100 | 14 days | $15.00 | $115.00 | 391% |
| $300 | 14 days | $44.99 | $344.99 | 391% |
| $500 | 14 days | $74.99 | $574.99 | 391% |
What are the rules for getting a payday loan in Indiana?
Indiana law sets specific rules to govern payday lending, including a cap on the loan size and a ban on extending the loan. The maximum amount you can borrow is $605. The loan term cannot be longer than 14 days. A key rule is that rollovers are prohibited. A rollover is when a lender extends the due date of your loan for an additional fee. Indiana law does not allow this, which helps prevent a single loan from creating a long cycle of debt. There is also a 7-day "cooling-off" period. This means you must wait a full week after paying off one payday loan before you can take out another one from the same lender.
Are there cheaper alternatives to a payday loan in Indiana?
Yes, several alternatives are available that typically cost far less than a payday loan. Exploring these options first could save you a significant amount of money.
Bank Small-Dollar Loans: Some major banks, like Wells Fargo and Truist, offer small loan programs to their existing checking account customers. These are often called "Simple Loans" or "Flex Loans." Approval is usually based on your account history and direct deposits, not just your credit score. Their APRs are generally between 100-200%, which is high but still much lower than the 391% APR of a payday loan.
Earned Income Tax Credit (EITC) Advance: If you are expecting a tax refund, you may be eligible for the EITC. This is a refundable credit for working people with low to moderate income. In Indiana, you can get your taxes prepared for free through the VITA program if your income is below about $60,000. The EITC can add $1,000 to $6,400 to your refund. This is money you have already earned, and getting it through free tax prep costs you nothing.
For a full list of options, review our guide to payday loan alternatives.
What should I do if I have a problem with a lender?
You should file a formal complaint with the state regulator, the Indiana Department of Financial Institutions. If a lender has violated state law—like trying to charge an illegal fee or not following the cooling-off period—you have the right to report them. Filing a complaint with the Indiana Department of Financial Institutions is free and does not require a lawyer. Most complaints are resolved within 30 to 60 days. You can also contact the Indianapolis or Fort Wayne consumer protection agencies for local help.
A checklist before you borrow
Use these steps to make an informed decision:
- Calculate the exact dollar amount of the fee for your loan using Indiana's tiered structure.
- Confirm you can repay the full amount (loan + fee) on your next payday without needing an extension.
- Check if your employer offers any emergency advance programs.
- Contact your bank or credit union to ask about their small-dollar loan options.
- Explore a side gig or selling unused items for quick cash.
- If you are a service member, ask your legal assistance office about the 36% Military Lending Act APR cap.
Frequently Asked Questions
What is a payday loan?
A payday loan is a small, short-term cash loan designed to be repaid in full on your next payday. It is meant for emergency expenses, not long-term financial needs. The high cost makes it an expensive form of credit.
Can I get a payday loan with bad credit in Indiana?
Yes, most payday lenders do not focus on your traditional credit score. They primarily check your income and active checking account to approve a loan. However, this does not make the loan a good choice for your situation. Always consider the high cost first.
Is there a limit on how many payday loans I can have at once?
Indiana law does not set a specific limit on the number of loans from different lenders. However, a 7-day cooling-off period prevents you from immediately taking a new loan from the same lender after paying one off. The best practice is to only ever have one at a time due to the high cost.
Are online payday loans legal in Indiana?
Yes, online lenders can operate in Indiana if they comply with state law. This means they must follow the same rules on fees, maximum loan amount ($605), and term length (14 days). They are also prohibited from offering rollovers.
Where can I learn more about how payday loans work?
You can read our comprehensive guide that explains how payday loans work in more detail. It covers the general process, costs, and risks common across most states.