Payday loan alternatives that cost less

1. Payday alternative loans (PALs)

Federal credit unions make two kinds of PAL. The original version lends $200 to $1,000 for one to six months; PALs II lends up to $2,000 for up to twelve months. Both cap interest at 28% APR and the application fee at $20. For the original PAL you must have been a member for at least a month, while PALs II has no waiting period. Borrowing $500 for three months costs about $24 in interest, compared with roughly $450 if you rolled a payday loan over for the same time.

2. A payment plan with the company you owe

Utilities, hospitals, landlords and card issuers would rather be paid late than not at all. Call before the due date, explain the shortfall and ask for an extension or installments. Get the agreement in writing.

3. Assistance programs

Programs exist for the bills that most often lead to payday loans: rent, energy, food and medical care. Dial 211 or use USA.gov’s bill-help directory to find them. Assistance is paid to the biller and is not repaid.

4. An advance from your employer

Many employers will pay part of your earned wages early. See paycheck advance.

5. Cash advance apps

For $50 to $250 until payday, an app with a free standard transfer costs nothing. See cash advance apps.

6. Small-dollar loans from your bank

Several large banks offer small loans to existing checking customers for a flat fee, repaid in installments. Ask your bank what it offers.

7. A credit card

A purchase on a card at 25% APR, or even a cash advance with its fee, costs far less than a payday loan.

8. Nonprofit credit counseling

If bills regularly exceed income, a counselor at a nonprofit agency can review your budget for free and set up a debt management plan that lowers interest rates.

Which alternative fits your situation

• A bill is due and income is on the way: ask the biller for more time, then cover the gap with an app or an employer advance.
• You need $200 to $2,000 for a few months: a credit union payday alternative loan.
• The bill is rent, power, heat or medical care: call 211 about assistance before you borrow.
• You come up short every month: nonprofit credit counseling, because a loan cannot close a permanent gap.

How the costs compare

When a payday loan is still on the table

If none of these works and your state allows payday lending, check the legal limits on your state’s page and price the loan with the calculator. Borrow the minimum, and plan the repayment before you sign.