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If you’ve recently taken out a payday loan you might be wondering whether you can switch lenders. The simple answer is no. Once you have taken out a payday loan with a lender you have a contract with that lender which you must abide by.

When it comes to any short term loan, whether acquired online or in store, you are legally required to repay them the money you have borrowed on the agreed repayment terms. However, there are some options you may wish to consider if you want to switch your payday lender at any point during the term of your agreement with them.

Payday loans are one of the quickest and easiest ways to borrow money instantly in the USA, but this sometimes leaves customers unsure when it comes to the specific rules around these popular loans and what to do if they want to switch or even cancel a payday loan at any point.

Can I Cancel My Payday Loan?

Perhaps you’ve taken out a payday loan and you now realize that you haven’t got the best deal or you feel you no longer need the loan. Maybe you found another lender who offers a more reasonable rate or a loan broker that can find you better payday loan offers in your state.

Payday lenders are required to give borrowers a cooling off period.

This means that you have the option to cancel your payday loan shortly after you take it out. Lenders in the US allow customers to rescind a payday loan before the close of the following business day.

For example, if you take out a loan on Monday morning, you would have until the end of Tuesday to rescind or cancel your payday loan.

Cancelling your payday loan involves repaying all the money you borrowed in full. Therefore, if you borrow $500 and then in the cooling off period decide to cancel your loan, even if you have already used some of the money you borrowed, you would have to repay the full $500 loan amount.

If you wanted to switch payday lenders you could cancel your payday loan and take out a new loan with a different lender, as long as this is done within the cooling off period of the first lender.


Consider your options carefully before you opt for switching or cancelling an arrangement with a loan provider or payday lender

How Does a Payday Loan Work?

A payday loan is a short-term loan designed to tide you over from one pay check to the next. Generally, a payday loan will be borrowed over a short period, either a month or a couple of months, meaning that you shouldn’t necessarily need to switch lenders, as the period over which you borrow money is a short period already when it comes to payday loan options.

A payday loan is characterized by how easy and quick it is to get the money you need into your account. This makes it perfect for unexpected financial situations or emergencies. Payday loans are available to a wide range of customers and a good credit score is not always needed.

However, if you fail to repay your loan, perhaps because you have found another lender you prefer, or because you simply want to change the lender you borrow from, you will damage your credit score and could end up with bad credit, which will harm your future chances of being able to get any loan.

Are There Alternatives To A Payday Loan If I Want to Switch Lenders?

If payday loans are prohibited in your state this does not always mean you cannot borrow money. There are many other solutions available for short-term borrowing, but you will need to check your local state laws.

States like Texas and Illinois allow payday lending within certain state guidelines, but others like New York do not. Therefore, always check whether or not payday lending is legalized in your state before you take out a loan.

For those looking to switch lenders or find an alternative to payday loans, popular short term loan options in the USA include:

  1. Personal Loans: A personal loan is a form of credit that can help with big payments or to consolidate debt. Personal loans tend to have a lower rate of interest on credit cards. For this reason, personal loans are often used to consolidate credit card debt into more manageable monthly payments.
  2. Installment Loans: Installment loans or another type of short term loan which can cover payments that occurred between pay checks. Installment loans are a good alternative to payday loans. They often provide a bit more flexibility as you often have longer to pay them back.
  3. Credit Counseling: If you’re experiencing mountain debt and find yourself in financial difficulty, credit counseling may be a good option. Through credit counseling you can develop a realistic budget and receive guidance to build savings.
  4. Tribal Lenders: Native American tribes, or payday lenders collaborating with tribes, can offer payday lending in states where these types of loans may otherwise be illegal. Tribal lenders are generally considered to be a safe option however they can sometimes have very high interest rates so make sure you know what you’re getting into.