Payday Loans in Alabama: Laws, Costs, and Your Options (2026)

Payday loans in Alabama are legal and licensed under the Deferred Presentment Services Act, Code of Alabama Title 5, Chapter 18A. A lender can advance up to $500, the fee is capped at 17.5% of the amount advanced, the loan runs 10 to 31 days, and you can roll it over once. No lender can knowingly lend to you if your payday loans from all lenders would top $500, which lenders check in a statewide database. This page covers what the Act allows, what a loan costs, your rights, and which of the lenders we review serve Alabama. For how Alabama compares with every other state, see payday loan laws by state.

Alabama payday loan rules at a glance

Rule	Alabama
Legal status	Permitted, through a State Banking Department licensee (Section 5-18A-3)
Regulator	Bureau of Loans, Alabama State Banking Department, 334-242-3452
Maximum loan	$500, and no more than $500 outstanding across all lenders (Sections 5-18A-12, -13)
Fee cap	17.5% of the amount advanced; $87.50 on $500
Loan term	10 to 31 days (Section 5-18A-13(c))
Rollovers	One, for two continuous transactions at most (Section 5-18A-12(b))
Cooling-off period	Next business day after repaying in full, following two continuous transactions
Database	Statewide database run by a private vendor; lenders cannot pass its fee on to you
Repayment plan	Lender must offer, in writing, four equal monthly installments at no extra cost before suing (Ala. Admin. Code r. 155-2-4-.12(2))
Right to cancel	None in the Act; you can redeem your check early by paying the contract amount
Returned check	One returned-check fee; no bad-check conviction for insufficient funds (5-18A-13(h))
Military borrowers	36% federal MAPR cap under the Military Lending Act

How an Alabama payday loan works

You sign a written agreement and give the lender a personal check or a debit authorization, dated the day you sign. The lender pays you in cash and agrees to hold the check for 10 to 31 days. The agreement must disclose the fee as a finance charge under the federal Truth in Lending Act, and the lender’s fee schedule must carry, in capital letters above your signature, a notice that fees for these loans may be significantly higher than for other types of loans (Section 5-18A-13).

Before lending, the lender must use a third-party database to confirm your outstanding payday loans do not exceed $500 (Section 5-18A-13(o)). The State Banking Department says the database is run by a private vendor and that the lender pays its per-transaction fee; it cannot be passed on to you.

What a payday loan costs in Alabama

The fee is up to 17.5% of the amount advanced, whatever the term:

Amount advanced	Maximum fee	APR over 14 days	APR over 31 days
$100	$17.50	About 456%	About 206%
$300	$52.50	About 456%	About 206%
$500	$87.50	About 456%	About 206%

The APR columns are our own arithmetic, not a quote; your written agreement states the actual APR. Because the fee is flat, a longer term lowers the APR but not the dollar cost, so ask for the latest due date the law allows.

A rollover is charged “at this fee”, so a $500 loan rolled over once costs $87.50 twice: $175 in fees to borrow $500 for up to about two months.

After a rollover: the repayment option

After the first loan period and one rollover, the full balance comes due. If you cannot pay it, ask for an extended repayment plan of four equal monthly installments of the remaining balance (Section 5-18A-12(c)). The Banking Department’s rule bars a lender from suing to collect until it has offered you this plan in writing at no additional cost (Ala. Admin. Code r. 155-2-4-.12(2)), but you do not have to wait for a lawsuit: ask for it directly, before the due date.

The lender cannot sue you on a defaulted loan until it sends written notice of your rights; if you do not act on them within 15 days, it can go to court. The lender also cannot pay off your loan with another loan from itself or an affiliate, except for the one rollover the Act allows (Section 5-18A-13(n)).

Your rights

1. A licensed lender. Confirm the license with the Bureau of Loans at 334-242-3452 or banking.alabama.gov.
2. A capped loan and a capped fee. No more than $500 outstanding across all lenders and no more than 17.5% in fees.
3. One rollover. Then a pause until the next business day after you repay in full.
4. Early redemption. Pay the contract amount any time before the deposit date to get your check back.
5. Notice before a lawsuit. Written notice of your rights and 15 days to act on them.
6. No bad-check conviction for insufficient funds. You cannot be convicted under the bad-check statute if the check bounces for insufficient funds. That protection does not cover a check written on a closed account (Section 5-18A-13(h)).
7. One returned-check fee, nothing more. No other fees or charges are allowed beyond those the Act authorizes (Section 5-18A-12(d)).
8. The federal Truth in Lending box. The APR, finance charge, amount financed, and total of payments must be disclosed before you sign.

What happens if you cannot repay

Ask about the four-installment option before the due date. If the loan goes into default, the lender must send written notice before suing, and a check that bounces for insufficient funds cannot lead to a bad-check conviction. Read what happens if you default on a payday loan for how collection works, and how to escape the payday loan cycle if one loan keeps leading to the next. If the real problem is a bill you cannot cover, start with what to do when you can’t make this month’s payment. The State Banking Department can order refunds of unlawful fees and civil penalties of up to $1,000 per transaction (Section 5-18A-16), so report a problem to the Bureau of Loans.

Alternatives worth trying first in Alabama

A payday loan is legal in Alabama but is the most expensive route here, so these come first, roughly cheapest first:

Option	What it costs	The catch
Payment plan on the bill itself	Often nothing	You have to ask before the due date
211 referral to rent, utility, or food help	Nothing	What is funded varies by county
Federal credit union PAL I	Up to 28% APR plus an application fee of up to $20; $200 to $1,000, 1–6 months	One month of membership first; one PAL at a time
Federal credit union PAL II	The same caps; up to $2,000, 1–12 months	Not every federal credit union offers one
Alabama payday loan	$87.50 fee on $500 over 14 days, about 456% APR (above)	One rollover at most, then a cooling-off period

The credit union limits come from federal regulation (12 CFR 701.21(c)(7)): no more than three PALs in six months, and no rollovers. Call 211 to reach the local referral line. Employer pay advances and earned-wage apps cost more than their small fees suggest; payday loan alternatives that actually work has the numbers for each option. If an installment loan is on the table, installment loans vs. payday loans explains how to compare total cost.

If you do borrow, borrow the smallest amount, take the latest due date allowed, and confirm the lender’s Alabama license before you sign.