If you search for payday loans in Denver, Colorado, you may expect the old two-week loan with a flat fee. The law no longer allows that. This guide explains how Colorado Prop 111 payday loans work today, what the rules mean in dollars, and which cheaper choices to check first.
Quick answer: Colorado Proposition 111 capped payday loans, which state law calls deferred deposit loans, at a 36% APR. Today's legal product is a small loan of no more than $500 that must run at least six months. In Denver, compare the total cost with a credit union loan or a payment plan before you sign.
What Proposition 111 changed
Colorado voters approved Proposition 111 in November 2018, and it took effect on February 1, 2019. It capped payday loans at a 36% annual percentage rate (APR). Before that, Colorado payday loans averaged well over 100% APR. Since the cap, most payday storefronts in the state have closed.
State law calls these products “deferred deposit loans.” The legal product today is better described as a small installment loan capped at 36% APR. For more on the math, see how Colorado’s 36% APR cap is calculated.
The main rules in plain language
Here are the key points of the Deferred Deposit Loan Act:
- Amount: a lender may not lend more than $500 to one consumer at any time.
- Term: the minimum term is six months. There is no maximum term and no minimum finance charge.
- Cost: the rate is capped at 36% APR, and a lender may charge only the charges the Act expressly allows.
- Cancel: you may cancel on or before 5 p.m. the next business day after the loan.
A lender may make more than one loan to the same person only if the total stays at or below $500 and there is at least a 30-day wait between loans. Read more in your rights as a Colorado loan borrower.
What a $500 loan really costs
At 36% APR, repaid in six equal monthly payments, these loans cost about this much:
- $300: about $32.28 in interest, about $55.38 a month, about $332.28 repaid.
- $400: about $43.03 in interest, about $73.84 a month.
- $500: about $53.79 in interest, about $92.30 a month, about $553.79 repaid.
Stretch the $500 over 12 months and the payment drops to about $50.23, but the interest rises to about $102.77. A lower payment feels easier, yet you pay nearly double the interest. If you can afford the higher payment, the shorter schedule is cheaper.
Early payoff and the one-time renewal
If you repay early, the lender must refund a prorated share of the finance charge for the time left. Ask how the refund is calculated, and get the answer in writing.
A loan may be renewed only once, at no more than 36% APR, with a prorated refund if you renew early. After that the debt must be paid, although a lender may refinance it as a supervised loan under the Uniform Consumer Credit Code. If that happens, ask for the new APR and total repaid first. Learn more in what the Colorado Uniform Consumer Credit Code is.
If you miss a payment
For a returned payment, the lender may charge one returned-instrument charge of no more than $25 per loan. A court may also award court costs and reasonable attorney fees, but only if it decides so, and attorney fees may not exceed the loan amount. The law allows no other default fees.
You also cannot face a criminal penalty for taking one of these loans or because a check bounces, unless the account was closed before the agreed date. Missed payments can still bring collection calls and hurt your credit, so call the lender early. Colorado small claims cases are limited to $7,500 and are heard in Denver by the Denver County Court. Colorado Legal Services helps low-income residents with debt collection and other civil problems.
Cheaper options to check first
Even at 36%, a six-month loan is real debt. Start with these:
- Credit unions. Federal credit unions can offer payday alternative loans (PALs) with a cap of 28% interest plus an application fee of at most $20. Many also offer small personal loans. Check membership rules first.
- Payment plans. Ask the company you owe for more time or smaller installments.
- Assistance programs. Many are free and do not need to be repaid.
As an illustration only, a $1,000 loan at 18% a year over 12 months costs about $91.68 a month and about $100.16 in interest. Our guide to credit unions versus high-cost lenders in Denver has more.
Where to get help in Denver
Xcel Energy, which serves Denver, offers payment arrangements for past-due balances and income-qualified programs. Colorado’s LEAP helps with winter heating bills, and you apply through Colorado PEAK. Energy Outreach Colorado also helps income-qualified households with past-due energy bills. For other needs, dial 2-1-1, the Mile High United Way help line. See rent and utility help in Denver for more.
Online lenders and offers above 36%
Many online lenders claim tribal ownership or an out-of-state bank partnership. Online and out-of-state lenders must follow Colorado law when lending to Coloradans and should hold a Colorado license. Colorado’s 2023 law (HB 23-1229) applies its rate caps to some out-of-state bank loans. It is being challenged in federal court and the outcome is not final.
The practical step is simple. Treat any offer above 36% APR as a warning sign, and check the license with the Colorado Attorney General at coag.gov before sharing bank details. See what to check before applying for online loans in Denver.
How to read the loan disclosure
Federal Truth in Lending rules require the lender to show the APR, the finance charge, the payment schedule and the total of payments before you sign. Read them together, not just the monthly payment. For $500 over six months at 36% APR, the total should be close to $553.79. If it is far higher, ask the lender to explain each line, or walk away.
Hail, military and student situations
Denver is one of the most hail-prone urban areas in the country. If hail damages your car or roof, call your insurer first. For declared disasters, look at FEMA at disasterassistance.gov and SBA disaster loans.
The Military Lending Act sets a 36% MAPR cap, which includes most fees, for active-duty service members and covered dependents. Veterans, retirees and civilian workers are not covered. Buckley Space Force Base is in Aurora, next to Denver, and Airmen, Guardians and families can ask about Air Force Aid Society help through the base. Students should ask their school’s financial aid office about emergency aid.
Is this kind of loan right for you?
Ask three questions. Is the need urgent and specific? Can you pay the full amount every month for at least six months? Have you checked a credit union, a payment plan and assistance? If any answer is no, pause. If you go ahead, borrow only what you need and choose the shortest term you can afford. Compare options in payday, installment and personal loans compared.
Frequently asked questions
Yes, in a changed form. Colorado calls them deferred deposit loans. They are capped at 36% APR, limited to $500 per consumer at any time, and must last at least six months.
It capped payday loan APR at 36%. Voters approved it in November 2018, and it took effect on February 1, 2019.
Repaid in six equal monthly payments, it costs about $53.79 in interest. The payment is about $92.30 a month, and the total repaid is about $553.79.
Yes. You may cancel on or before 5 p.m. the next business day after the loan. Keep a copy of your paperwork.
No. You cannot face a criminal penalty for taking one of these loans or because the check bounces, unless the account was closed before the agreed date. The lender can still pursue the debt in civil court.
Often, yes. A PAL charges at most 28% interest plus an application fee of at most $20. On a very small loan the fee can raise the real cost, so compare the total repaid.
Be careful. Check the lender’s license with the Colorado Attorney General before you apply or share your bank information. Here is how to file a complaint against a Colorado lender if something goes wrong.
This article is educational and is not financial or legal advice. Before you borrow, confirm the lender is licensed with the Colorado Attorney General — Consumer Credit Unit (UCCC Administrator), and read the fee disclosure in full.