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Payday Loans

Payday Loan Alternatives for 2022

By June 16, 2022June 24th, 2022No Comments
payday loan alternatives

Payday Loan Alternatives: What Option Is Best for You?

Payday Loan Alternatives, there is a significant cost associated with payday loans. The annual percentage rate may be as high as 400 percent. Payday alternative loans are small-dollar loans with a more extended payback period. These loans are only available through select credit unions.

To get your hands on the money, you need it quickly. You’ll need to take out a payday loan. A less expensive choice may be an alternative payday loan.

In contrast to conventional payday loans, which have higher fees and annual percentage rates, payday alternative loans are substantially cheaper. You may be able to prevent a never-ending cycle of debt if you take advantage of this lower price.

What are payday loans?

Payday loans are short-term, low-dollar loans meant to bridge the financial gap between one paycheck and the next.

What are the alternatives?

Some federal credit unions provide payday alternative, modest, short-term loans. Federal credit unions in the United States are regulated by the National Credit Union Administration (NCUA), which sets standards for these loans.

Federal credit unions may provide their members with two payday alternative loans. Traditional PALs are expected to follow these guidelines.

  • The interest rate is limited to no more than 28%.
  • As a general rule, credit unions can’t charge more than $20 for an application fee, which is the cost of processing an application.
  • Loan repayment durations of one to six months are available to borrowers.
  • An acceptable range for loan amounts is $200 to $1,000.
  • The borrower must be a credit union member for a minimum of one month.

PAL II loans follow some of the same guidelines but have a few critical variations.

  • For the time being, the interest rate cannot exceed 28 percent.
  • The maximum application fee (no more than $20) is likewise capped.
  • A 12-month loan may be paid back in as little as one month.
  • A $2,000 loan is not out of the question.
  • Applicants must be members of the credit union already before they may apply.

How does it work?

Loans under $500 are characteristic of payday loans, which are short-term, high-interest loans.

A payday loan is a popular alternative for financing since it is generally simple and quick to get for the borrowers. In most cases, fill out some basic information and put in a post-dated check or bank debit authorization.

A payday loan has a two- to four-week repayment period and comes with a pre-paid check or debit authorization for the loan amount plus costs. Frequently, there comes a hefty price tag. Late penalties and interest rate increases can escalate if you fail to pay your debts on time.

Payday loans vs. other forms of short-term credit

Alternative loans for payday have numerous significant variations from traditional payday loans, beginning with who provides them.

Federal credit unions, member-owned nonprofit organizations regulated by the federal government, are the only ones that provide payday alternative loans.

Predatory lending is a term used to describe the lending practices of for-profit internet and brick-and-mortar stores that provide payday loans

The cost of the loan, who may be eligible, and the degree of risk involved in applying for the loan are a few more variations between payday alternative loans and traditional payday loans.

Total loan amount; interest rate; and repayment schedule

With an alternative payday loan, you may be able to borrow more. On the other hand, payday loans are usually for $500 or less, although payday alternative loans may be for as much as $2,000.

There are many cheaper alternatives to payday loans. The annual percentage rate (APR) for payday loans may be as high as over 400 percent, with costs ranging from $10 to $30 for every $100 borrowed. On the other hand, payday alternative loans charge as much as $20 for the application process alone.

Payday alternative loans often come with lengthier payback terms, ranging from one to 12 months. In contrast, most payday loans are due within two to four weeks.

What are the qualifications?

Remember that if you want a regular PAL, you must have been a credit union member at least a month before applying for an alternative payday loan (though you may be able to use a PAL II as soon as you join the credit union).

You may also be required to disclose the loan’s purpose or not have recently filed for bankruptcy to get a loan.

To get a payday loan, you simply need a bank account, proof of income, and evidence of your age to qualify. Payday lenders, on the other hand, may not consider your financial ability when making a loan, putting you in a position where you borrow money but then have difficulty repaying it.

Because certain states restrict payday lending, payday loans aren’t accessible in every state. Because of statewide regulations on payday loan interest rates and costs, even in places that allow it, payday lenders may choose not to lend.


Allowing several loan extensions may significantly increase the overall cost of a traditional payday loan. In the month after their initial payday loan, over 70% of borrowers take out another, and 20% take out ten or more. This is according to the Consumer Financial Protection Bureau (CFPB). The fees and interest accrued by borrowers due to each rollover might lead to a cycle of debt.

A payday alternative loan may be a better choice if you seek a less hazardous loan. Because you can only receive so many of these loans at a time, you’re less likely to become caught in a never-ending debt cycle.

How to get a no faxing payday loan

You’ll need to join a federal credit union to get an alternative payday loan.’s Credit Union Locator will help you identify credit unions in your area.

Within the NCUA’s regulatory framework, credit unions may establish their conditions for who is eligible for an alternative payday loan.

Take a look at the websites of several credit unions to determine whether they provide payday alternative loans that meet your needs. Members of certain credit unions may even be able to apply for these loans through the Internet.

What are my other choices for borrowing money?

Consider these other possibilities if you’re in a bind and don’t want to turn to a payday loan alternative.

  • Contact your creditor immediately if you need money for unpaid medical expenses or late utility bills. Make clear what you can’t afford, and don’t hold back. You could be eligible if a hardship aid program is available in your area. Alternatively, you might negotiate a lower interest rate.
  • It’s possible that credit counseling might help you locate “extra” money to pay off existing commitments and prevent more debt accumulation in the future by providing a new pair of eyes on your budget. Check out the National Foundation for Credit Counseling, a non-profit organization.
  • Apps that provide payday loans— Some apps, such as Dave or Earnin, may provide you with little sums of money. An emergency or a short-term issue might benefit from a little quantity of cash (often $100 to $500).

Scenario: Alternatives to Payday Loans

Before applying for a payday loan, follow the instructions below if you find yourself in any of the following situations.

For recurring payments, there are many options.

  • Directly with the lender, renegotiate the conditions of the loan.
  • Student loan deferments and forbearances may be applied for.
  • Reduce your monthly payments by consolidating your debts into one loan.

Possible One-Time Emergency Situations

  • Pay the bill using your credit card.
  • Get a short-term loan from a family member or close friend who can help you.
  • Inquire with your employer for a salary advance.
  • Talk to the creditor about your choices.
  • Make an application for a credit card.

The Bottom Line

Payday alternative loans from credit unions may be less expensive than payday loans if you need to borrow a small quantity of money. It’s essential to remember that if your credit union doesn’t provide PAL II loans, you may have to wait at least a month or more before applying for an alternative payday loan. In the same way that you would with any other loan, be sure you can pay it back before you use it.

Suppose an alternative payday loan isn’t a good match for your financial position. In that case, alternatives like a credit-builder loan or financial counseling might help you improve your credit scores and better manage your money so that you may be eligible for reduced interest rates in the future.

Taylor Day