Colorado’s 36% APR Cap: How It Works for Denver Borrowers

If you are trying to understand a small loan in Denver, it helps to know the rule that shapes the whole market: the Colorado 36% APR cap limits what a lender can charge on a deferred deposit loan, the product most people still call a payday loan. This guide explains what the cap counts, shows the math with real dollar examples, and gives you simple ways to check a lender before you sign.

What the cap says

Colorado is a 36% APR state. Voters approved Proposition 111 in November 2018, and it took effect on February 1, 2019. It capped payday loans, which the Deferred Deposit Loan Act (C.R.S. §§ 5-3.1-101 to 5-3.1-123) calls “deferred deposit loans,” at a 36% annual percentage rate.

Before the cap, Colorado payday loans averaged well over 100% APR. Since the change, most payday storefronts in the state have closed. Today the legal product looks more like a small installment loan than a two-week advance. For more, see payday loans in Denver and why they look different now.

Why “all-in” is the key idea

An APR shows the yearly cost of borrowing, including the finance charge. A rate cap only works if it counts what the lender charges for the loan. Under the Act, a lender may charge only the charges the law expressly allows (§ 5-3.1-105), and the 36% limit covers the finance charge as a whole.

That means a lender cannot advertise a low-looking interest rate and then add its own origination fee or monthly maintenance fee to make up the difference. Those fees are not current Colorado law for these loans. To see why the two numbers differ, read APR vs. interest rate.

A worked example: $500 over six months

Here is what 36% APR looks like in dollars. Take a $500 loan repaid in six equal monthly payments:

• Interest: about $53.79
• Monthly payment: about $92.30
• Total repaid: about $553.79

For comparison, $300 costs about $32.28 in interest, about $55.38 a month, and about $332.28 repaid. If a quote for the same amount and term shows far more, something extra has been added, and you should ask exactly what it is. Borrowing only what you need keeps the cost down.

How the term changes the total

Because the cap is a yearly rate, the length of the loan matters. Stretch the same $500 over 12 months and the interest rises to about $102.77, though the monthly payment drops to about $50.23. A lower payment can feel easier, but you pay for the extra months.

Colorado sets a minimum term of six months from the loan date (§ 5-3.1-103). There is no maximum term and no minimum finance charge. The rate sets the price of each month, and the term decides how many months you pay it.

Other rules that go with the cap

The rate is not the only protection in the Act:

• Amount: a lender may not lend more than $500 to one consumer at any time. More than one loan is allowed only if the total stays at or below $500 and there is at least a 30-day wait between loans (§ 5-3.1-106).
• Early payoff: if you repay early, the lender must refund a prorated share of the finance charge for the time left (§ 5-3.1-105).
• Right to cancel: you may cancel the loan on or before 5 p.m. the next business day after the loan (§ 5-3.1-106).
• Renewal: a loan may be renewed only once, at no more than 36% APR, with a prorated refund if renewed early. After that the debt must be paid, though a lender may refinance it as a supervised loan (§ 5-3.1-108).
• Bounced payment: one returned-instrument charge of no more than $25 per loan, plus court costs and reasonable attorney fees only if a court awards them. No other default fees are allowed (§ 5-3.1-112).

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 (§ 5-3.1-120).

How to check the math yourself

You do not need to be a math whiz to test a quote. Before you agree to anything:

• Ask for the APR in writing, not just the interest rate.
• Subtract the amount you borrow from the total you will repay. That gap is the cost.
• Compare it to the examples above. A $500 loan over six months should cost about $53.79 at 36% APR.
• Ask whether any other charge is added, and why.
• Read the fee disclosure in full.

A lender that will not walk you through the numbers is giving you a reason to walk away.

Online and out-of-state lenders

Online and out-of-state lenders must follow Colorado law when they lend to Coloradans, and they should hold a Colorado license. Some claim tribal ownership or an out-of-state bank partnership as a reason Colorado rules do not apply.

Colorado passed a 2023 law (HB 23-1229) aimed at applying 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 for a Denver borrower is to check the lender’s license with the Colorado Attorney General before borrowing. Our guide to online loans in Denver covers what else to look for.

Car-title and other installment loans

Colorado has no separate title-loan law. A loan secured by your car is a consumer loan that must follow the Uniform Consumer Credit Code and come from a licensed lender, and you can lose your car if you cannot pay. Installment and personal loans from finance companies are “supervised loans” under the same code, and those lenders must hold a supervised lender license. Their pricing differs from the deferred deposit cap, so ask for the APR in writing and compare offers.

Military borrowers near Denver

Active-duty service members, including active Guard and Reserve, and their covered dependents have an extra federal protection: the Military Lending Act caps most consumer loans at 36% MAPR, which is broader than APR and includes most fees. Veterans, retirees and civilian workers are not covered. Airmen, Guardians and families at Buckley Space Force Base, in Aurora next to Denver, can also ask about Air Force Aid Society help through the base.

Cheaper options to try first

Even at 36% APR a loan costs money, so try lower-cost options first. A credit union or bank loan can cost much less. As an illustration only, $1,000 at 18% a year over 12 months is about $91.68 a month and about $100.16 in interest. Credit unions have their own membership rules, so check whether you qualify, and see credit unions vs. high-cost lenders in Denver.

Federal credit unions may also offer payday alternative loans, capped at 28% interest plus an application fee of no more than $20. You can also ask a utility, landlord or medical provider for a payment plan.

Where to get help in Denver

• Dial 2-1-1 to reach Mile High United Way for local help.
• Ask Xcel Energy about a payment arrangement, and ask Energy Outreach Colorado or LEAP about energy bills.
• Colorado Legal Services helps low-income residents with civil problems such as debt collection.

If you think a lender charged more than the law allows, keep your papers and payment records, then look up the license or file a complaint at coag.gov. Our guide on how to file a complaint against a Colorado lender explains the steps.

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.