Can a South Dakota lender charge whatever it wants on an installment loan? No. A lender licensed by the state can charge at most 36% a year, and that figure counts interest, fees and add-on products together.

An installment loan is a personal loan repaid in fixed payments over several months, and it is often marketed to borrowers with bad credit. Voters set the cap in November 2016 through Initiated Measure 21. The Division of Banking's guidance shows no change to it as of September 2026.

The law and the regulator in charge

The governing law is Chapter 54-4, Money Lending Licenses, of the South Dakota Codified Laws. Section 54-4-52 requires a license for any money lending business in the state.

The regulator is the Division of Banking inside the Department of Labor and Regulation, at dlr.sd.gov. It classes anyone in the business of lending money as a money lender, and that expressly includes payday and title lenders. Lenders apply through the Nationwide Multistate Licensing System. Each location needs its own license, and every license expires December 31.

The sources set out no separate licensing rule for online lenders. The requirement covers anyone doing money lending business in the state.

What 36% includes

Rule South Dakota (as of September 2026)
APR cap, licensed lenders 36%, all-in (IM 21, effective November 16, 2016)
Counted in the cap Interest, fees, ancillary products such as credit insurance
Left out of the cap Late fees, returned-check fees, attorney fees after default (HB 1090, July 1, 2017)
Rollovers Restricted by SDCL 54-4-65; rolled-over loans stay under the cap
Loan amounts and terms No minimum or maximum given in the sources for installment loans
Penalty for breaking the cap Misdemeanor; loan void and uncollectable

The penalty has real force. A loan made above the cap is void, so the lender cannot collect principal, fees or interest on it. Section 54-4-44.1 bars lenders from dodging the cap by indirect means. Before the reform, the Center for Responsible Lending found these loans often ran above 300% APR.

Section 54-4-66 caps the size of payday loans, which are covered in the South Dakota payday loan rules.

Where the cap does not reach

The cap does not apply to state and national banks, federally insured institutions or state-chartered trust companies. It also skips stores that finance the goods they sell. The Center for Responsible Lending warns that rent-a-bank deals, where a nonbank lends under a bank's name, could be used to get around it. None of these sources address tribal lenders.

If a lender that is not a bank quotes you more than 36%, check its license with the Division of Banking at 605-773-3421. The Attorney General's office says it is illegal to charge advance fees for a guaranteed loan. It also flags promises of approval "regardless of your credit history" and required credit insurance as warning signs. Its hotline is 1-800-300-1986.

Cheaper places to borrow

Start with a credit union. After the cap took effect, the Center for Responsible Lending found that lending through payday alternative loans grew, and that banks and credit unions kept offering small loans. We found no named South Dakota assistance program in the state sources.

If you are closing on a house soon

Your mortgage underwriter reads your bank statements, so the loan deposit and each monthly payment will show up there. A new debt usually brings a request for a letter of explanation, a short signed note saying what the loan was for. The monthly payment also counts in your debt-to-income ratio, which is your monthly debt payments divided by your gross monthly income.

Paying the loan off before you apply removes that payment. Where the payoff money comes from will also show on your statements, though. Lender rules differ, so ask your loan officer before you take out a new loan or pay one off.