Alternatives to Payday Loans

You may be able to get a better deal elsewhere.

A young woman heads to her bank to apply for a low-rate personal loan.
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​ Kathrin Ziegler / Getty Images

Payday loans are easy to find but they might not be the best source of funding because of their high costs. Alternatives to these loans can provide much-needed relief from the nearly 400% APR payday loans can charge. Plus, other types of loans may have longer repayment periods, allowing you to make relatively small monthly payments as you eliminate debt. Even if you have bad credit, it’s worth exploring the alternatives before you get a payday loan.

Payday Alternative Loans

Payday Alternative Loans (PALs), offered exclusively through credit unions, have specific rules that limit the costs you pay and the amount you borrow. For example, application fees are limited to $20 or less. You can borrow between $200 and $1,000, and you have up to six months to repay your loan.

Personal Loans

Using a personal loan typically allows you to borrow for periods of one to seven years. That longer term results in smaller monthly payments, so large loan balances are easier to manage. However, you pay interest for as long as you borrow, so it’s not ideal to stretch things out for too long. Several online lenders are willing to work with borrowers who have fair credit or bad credit.

Credit Cards

Credit cards allow you to quickly spend money or borrow against your credit limit with a cash advance. If you already have a card open, that makes things easy. You can also apply for a new credit card and get a quick answer on approval. Although rates may be relatively high, credit cards are likely less expensive than a payday loan, and you may enjoy more flexibility when it comes to repayment.

If you have poor credit scores, your best chance at a credit card may be secured credit cards. These cards require a cash deposit that acts as your credit limit and minimum deposits usually start at $200.

Consolidate Existing Debts

Instead of taking on more debt with a payday advance, you may benefit from rearranging or refinancing your current loans. If you get a lower rate or longer repayment term, you should have lower monthly payments, potentially eliminating the need to borrow more. Explore debt consolidation loans that allow you to bundle everything into one loan and get your cash flow under control.

Borrow With a Co-Signer

A co-signer could help you get approved for a personal loan, credit card, or debt consolidation loan. He or she applies for a loan with you and, consequently, the lender takes the co-signer’s credit history into account when deciding to give you a loan. For the strategy to work, your co-signer should have a high credit score and plenty of income to cover the monthly payments (even though you’re the one paying, ideally).

Co-signing is generally risky, so it may be hard to find somebody willing to put their credit on the line for you.

Borrow From Friends or Family

Borrowing from people you know can complicate relationships, but sometimes it’s the best option for avoiding high-cost loans. If somebody is willing to help you, consider the pros and cons, and think about how things will go if you’re unable to repay your loan. The IRS requires that you and your family member create a signed document that includes the loan’s repayment period and a minimum interest rate. If you can, set up a free consultation with a CPA and ask her or him what the tax implications of the loan could look like for you and the person lending to you.

Get a Payroll Advance

If your work schedule is consistent, you may be able to ask your employer to provide an advance on your future earnings. Doing so would enable you to dodge hefty payday loan costs, but there’s a catch: You’ll receive smaller paychecks (or bank deposits) in subsequent pay periods, which could leave you in a difficult situation.

One of the most flexible payroll advance apps is Earnin, which does not charge monthly fees or require your employer to participate. With Earnin, you can borrow up to $100 to $500 per day if you’re eligible, and the service will collect from your bank account after payday. There’s no interest cost or processing fee with Earnin, but you can leave a tip through the app.

Ask Your Lenders for Payment Assistance

If you’re considering a payday loan because you need help keeping up with payments or bills, ask about payment and assistance programs. For example, your auto-loan lender may be willing to work something out with you. You might be able to negotiate for delayed payments or a different payment schedule, which could eliminate the need to take on more debt or have your car repossessed. 

Consider Government Programs

Local assistance programs through your Department of Health and Human Services may also help you cover some expenses. Your local office should have information on a variety of financial-help programs that could cover the cost of food and other expenses. 

For example, the Supplemental Nutrition Assistance Program (SNAP) could provide up to $646 a month to purchase food. If you’re eligible for the program, the money you get for groceries could help you avoid taking out a loan. 

Emergency Savings

If you’re fortunate enough to have emergency savings available, consider tapping those funds instead of getting a payday loan. One purpose of an emergency fund is to help you meet your needs while avoiding expensive debt—and you might be in the midst of an emergency. Of course, it’s best to keep your savings intact if you’re thinking of borrowing for a “want” instead of a need.

Other Financial Moves

If the strategies above don’t free up cash flow, you may find some relief with traditional (but not necessarily easy) money moves. Selling things you own can help you raise cash quickly, but only if you have valuable items that you’re willing to part with. Earning extra by working more may be another option, and requires that you have the time, energy, and opportunity to do so. Finally, cutting costs could help to some degree, if you haven’t already trimmed your spending.

Key Takeaways


  • Payday loans can be an expensive source for borrowing.
  • Several alternatives to payday loans exist, including personal loans, credit cards, and PALs.
  • Creative solutions like payroll advances and friends/family loans may provide what you need.
  • Financial help may be available from lenders, billers, and local organizations.

Article Sources

  1. National Credit Union Administration. "Payday Loan Alternatives." Accessed Aug. 28, 2020.

  2. Earnin Help Center. "How Much Money Can I Cash Out With Earning?" Accessed Aug. 28, 2020.

  3. Center on Budget and Policy Priorities. "A Quick Guide to SNAP Eligibility and Benefits." Accessed Aug. 28, 2020.