Payday lending is legal in Indiana, but it is tightly capped. Indiana regulates these products as “small loans” under the Indiana Uniform Consumer Credit Code (IUCCC) at Indiana Code Article 24-4.5, Chapter 7. A single small loan must be between $50 and $550, the loan cannot exceed 20% of the borrower’s monthly gross income, the minimum term is 14 days, and lenders may charge tiered finance fees of roughly 15% on the first $250, 13% on the next portion up to $400, and 10% above $400 of the principal. Critically, Indiana prohibits rollovers — a lender cannot let you refinance or “flip” an existing payday loan into a new one to push off the due date. Even with these limits, the fees translate into very high annual percentage rates, often well above 300% APR on a typical two-week loan, so these are expensive products even though they are technically capped.
Is Payday Lending Legal in Indiana?
Yes. Unlike states such as New York, North Carolina, or Pennsylvania that effectively ban storefront payday lending through low usury caps, Indiana permits licensed payday lenders to operate. They are licensed and supervised by the Indiana Department of Financial Institutions (DFI). The trade-off Indiana made is to allow the loans but bolt on consumer protections: dollar caps, an income-based size limit, a rollover ban, and a mandatory extended payment plan after repeat borrowing. Any lender offering these loans must be licensed; an unlicensed payday loan is not enforceable under Indiana law.
How Much Can You Borrow, and for How Long?
The statute sets a firm range for the principal of a small loan:
- Minimum loan: $50.
- Maximum loan: $550.
- Income limit: The principal cannot be more than 20% of your monthly gross (pre-tax) income. So a borrower earning $2,000 a month gross could not borrow more than $400, even though the statutory ceiling is $550.
- Minimum term: 14 days. There is no “one-day” payday loan in Indiana; the term has to give you at least two weeks.
The income cap is one of Indiana’s more meaningful protections, because it ties the size of the debt to what you actually earn rather than letting a lender hand you the maximum regardless of your ability to repay.
What Can a Payday Lender Charge in Indiana?
Indiana does not use a single flat percentage. Instead, it allows a tiered finance charge that steps down as the loan gets larger. As established in the small loan statute, the permitted charge is approximately:
- 15% of the loan principal that is $250 or less;
- 13% of the principal that is greater than $250 and up to $400;
- 10% of the principal that is greater than $400 (up to the $550 cap).
These percentages are charged on the loan amount, not as an annual rate. Because the loan term is so short — often just two weeks — the effective APR is enormous. A $100 loan with a $15 fee over 14 days works out to roughly 390% APR. That is the central thing to understand about Indiana: the loans are legal and the per-loan fee looks modest in dollars, but the annualized cost is several hundred percent. If you are quoted a charge that exceeds these tiers, that is a red flag worth reporting.
Rollovers, Repeat Loans, and the Extended Payment Plan
Indiana directly targets the “debt trap” cycle in two ways. First, rollovers and refinancing are prohibited. A lender cannot collect a new finance charge to extend or renew the same loan, which is how borrowers in less-regulated states end up paying fees indefinitely on the same principal.
Second, Indiana requires a mandatory extended payment plan (EPP) after a string of consecutive loans. Once a borrower has taken out a defined number of consecutive small loans, the lender must offer the option to repay the outstanding balance in installments — spread over multiple payments — at no additional fee or finance charge. This gives a borrower who is stuck in repeat borrowing a structured exit instead of another high-cost loan. Because the exact trigger count and the number of allowed installments are set by statute and can be adjusted, confirm the current thresholds with the Indiana DFI before relying on a specific number.