Alabama Payday Loans: Laws, $500 Limit & 17.5% Fee Guide (2026)
Alabama regulates payday loans with a $500 maximum amount and 17.5% fee cap—slightly higher than neighboring states. Understanding Alabama's payday loan laws helps borrowers make informed financial decisions.
Alabama Payday Loan Quick Facts
- Legal Status: Legal and regulated
- Maximum Amount: $500
- Maximum Fee: 17.5% of face amount (up to $87.50 on $500 loan)
- Typical Loan Terms: 10-31 days (commonly 14 days)
- Maximum APR: 456% (for 14-day loan)
- Regulatory Authority: Alabama State Banking Department
- Rollovers: 1 rollover allowed (with 10% principal payment)
- Loan Limit: 1 loan at a time (verified via database)
- Database System: Veritec Solutions
Understanding Alabama Payday Loan Laws
Alabama's payday lending industry operates under the Deferred Presentment Services Act, which provides moderate regulations. The state caps loans at $500 with a maximum 17.5% fee—slightly higher than the 15% standard in many states but lower than Missouri's 75% cap.
The Alabama State Banking Department oversees payday lending and enforces these key provisions:
- Maximum loan amount: $500 per borrower
- Maximum fee: 17.5% of the face amount ($87.50 on a $500 loan)
- Loan terms: Typically 10-31 days
- One loan at a time (enforced through Veritec Solutions database)
- One rollover permitted (requires 10% principal payment)
- Mandatory written disclosures
- Prohibition on criminal prosecution for defaults
How Much Do Alabama Payday Loans Cost?
Alabama's 17.5% fee cap creates moderate costs—higher than Wisconsin (2.75%) or Tennessee (15%), but much lower than Missouri (75%). Here's the breakdown:
| Loan Amount | Fee (17.5%) | Total Repayment | APR (14 days) |
|---|---|---|---|
| $100 | $17.50 | $117.50 | 456% APR |
| $300 | $52.50 | $352.50 | 456% APR |
| $500 (maximum) | $87.50 | $587.50 | 456% APR |
💡 Alabama vs. Neighboring States:
Alabama's 17.5% fee is 2.5 percentage points higher than Tennessee's 15% cap. On a $500 loan, this means Alabama borrowers pay $87.50 vs. Tennessee's $75—a $12.50 difference. While still expensive, Alabama's fees are moderate compared to states like Missouri (up to $375 on the same loan).
Alabama Cities: Payday Loan Affordability Analysis
Let's examine how payday loan costs compare to typical household incomes in Alabama's three largest cities:
Birmingham (Population: 200,733 | Median Income: $4,083/month)
Birmingham is Alabama's largest city and economic hub. A maximum $500 loan ($587.50 total repayment) represents 14.4% of monthly income for median earners—a significant expense. Birmingham residents have access to multiple lenders, credit unions (Alabama Credit Union, APCO Employees CU), and community assistance programs.
Montgomery (Population: 200,603 | Median Income: $3,917/month)
As the state capital, Montgomery has moderate incomes. A $500 payday loan ($587.50 repayment) equals 15.0% of monthly income—approaching the recommended maximum. Montgomery residents should explore alternatives through credit unions or state employee assistance programs.
Huntsville (Population: 215,006 | Median Income: $5,250/month)
Huntsville's aerospace and defense industries create higher incomes. A $500 loan ($587.50 repayment) represents 11.2% of monthly income—more manageable for median earners. However, Huntsville's tech workers and government employees may qualify for lower-cost alternatives through employers or federal credit unions.
Eligibility Requirements for Alabama Payday Loans
To qualify for a payday loan in Alabama, you typically need:
- Age: At least 18 years old
- Residency: Alabama resident with valid state ID or driver's license
- Income: Verifiable regular income (employment, Social Security, disability benefits)
- Bank Account: Active checking account in your name
- Contact Information: Working phone number and email
Alabama payday lenders typically do not check traditional credit scores, making these loans accessible to borrowers with bad credit or no credit history. However, the statewide database checks for existing payday loans.
How to Apply for an Alabama Payday Loan
- Find a Licensed Lender: Verify the lender's license through the Alabama State Banking Department website (banking.alabama.gov).
- Gather Documents: Have your ID, recent pay stubs or benefit statements, and bank account information ready.
- Submit Application: Apply online for same-day decisions or visit a storefront location.
- Review Terms: Carefully read the loan agreement showing the $500 max, 17.5% fee, repayment date, and total cost.
- Receive Funds: Approved borrowers typically get funds within one business day (online) or immediately (in-store).
- Plan Repayment: Ensure you have funds available on your due date (typically 14 days) to avoid fees and collections.
Pros & Cons of Alabama Payday Loans
✅ Advantages
- ✓ No credit check for most lenders
- ✓ Fast approval (often same-day)
- ✓ One rollover allowed for emergency extensions
- ✓ One-loan limit prevents multiple debts
- ✓ Database verification protects consumers
- ✓ State regulation ensures licensed lenders
❌ Disadvantages
- ✗ Very expensive (456% APR for 14 days)
- ✗ Higher fees than neighbors (17.5% vs 15%)
- ✗ Low maximum amount ($500 limit)
- ✗ Short repayment terms (10-31 days)
- ✗ Rollover fees can trap borrowers
- ✗ No credit building (not reported to bureaus)
Better Alternatives to Alabama Payday Loans
Before taking a payday loan in Alabama, consider these lower-cost options:
- Credit Union Payday Alternative Loans (PALs): Alabama Credit Union, APCO Employees Credit Union, and others offer PALs with APRs capped at 28%—dramatically lower than payday loans.
- Employer Paycheck Advances: Many Alabama employers offer interest-free paycheck advances—check with your HR department.
- Payment Plans: Contact utility companies, landlords, or medical providers about payment arrangements.
- Community Assistance: United Way of Central Alabama, Community Food Bank, and local churches provide emergency financial help.
- Personal Installment Loans: Online lenders like Upgrade, LendingClub, or Upstart offer installment loans with lower APRs (36-120%) and longer terms.
- Credit Card Cash Advances: While expensive (25-30% APR), these are still significantly cheaper than payday loans' 456% APR.
- Gig Economy: Quick earnings from Uber, DoorDash, Instacart, or TaskRabbit can cover short-term cash needs.
Frequently Asked Questions
What is the maximum payday loan amount in Alabama?
Alabama allows payday loans up to $500 with a maximum fee of 17.5% of the face amount. This means you can borrow up to $500 and pay up to $87.50 in fees, for a total repayment of $587.50.
How much does a $500 payday loan cost in Alabama?
A $500 payday loan in Alabama costs $87.50 in fees (17.5% of $500), for a total repayment of $587.50. This translates to 456% APR for a 14-day loan or 228% APR for a 31-day loan.
Who regulates payday loans in Alabama?
The Alabama State Banking Department regulates payday lenders under the Deferred Presentment Services Act. All lenders must be licensed and comply with state regulations. Verify licenses at banking.alabama.gov.
How many payday loans can I have at once in Alabama?
Alabama law limits borrowers to one payday loan at a time, up to a maximum of $500. Lenders use a statewide database (Veritec Solutions) to verify you do not have an outstanding loan.
What is the loan term for Alabama payday loans?
Alabama payday loans typically have terms ranging from 10 to 31 days. The most common term is 14 days, though lenders may offer flexibility based on your pay schedule.
Can I roll over my Alabama payday loan?
Yes, Alabama allows one rollover per payday loan. However, you must pay at least 10% of the principal before rolling over, and additional fees will apply. Use this cautiously to avoid debt cycling.
Do Alabama payday lenders check credit?
Most Alabama payday lenders do not perform traditional credit checks with Experian, Equifax, or TransUnion. However, they verify your payday loan history through the state database and confirm your income.
Are payday loans available in all Alabama cities?
Yes, payday loans are available throughout Alabama. Major cities like Birmingham, Montgomery, and Huntsville have numerous storefront locations, while online lenders serve all areas.
How can I verify an Alabama payday lender is licensed?
Check the Alabama State Banking Department website (banking.alabama.gov) to verify lender licenses. All legitimate payday lenders must display their license number and comply with regulations.
What happens if I cannot repay my Alabama payday loan?
If you cannot repay on time, contact your lender immediately. Some lenders may offer payment plans, though not mandated by law. Defaulting can result in NSF fees, collections, and ChexSystems reporting. Alabama prohibits criminal prosecution for defaults.
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⚠️ Important Consumer Notice
Payday loans are designed for short-term financial needs and should not be used as long-term financial solutions. Borrowing more than you can afford to repay can lead to a cycle of debt.
This information is for educational purposes only and does not constitute financial advice. Loan terms, availability, and costs vary by lender. Always read your loan agreement carefully before signing.
Alabama residents: Report unlicensed or abusive lenders to the Alabama State Banking Department at (334) 242-3452 or visit banking.alabama.gov.
About the Author
Rostislav Sikora is an AI Orchestrator and Loan Specialist with expertise in consumer finance regulations across all 50 states. With a focus on financial literacy and consumer protection, Rostislav helps borrowers understand their options and make informed decisions about payday loans and alternative financing.
Last updated: January 27, 2026 | Learn more about our editorial process