Low Cost Payday Loan Alternatives

Here are 10 payday loan alternatives to keep in mind for when you’re short on cash.

1. Try a payday alternative loan

Some credit unions offer payday alternative loans, or PALs, which are loans designed to provide a lower-cost alternative to payday loans. With this option, you can borrow up to $1,000, and the loan term ranges from 1 to 6 months. As long as you are a member of the credit union for at least a month, you are eligible to take out a PAL.

Keep in mind that payday alternative loans can still carry fairly high interest rates. Fortunately, PAL interest rates are capped at 28% by law, which is far better than what you typically see on a payday loan.

2. Set up a payment plan with the company

If you’re having trouble making payments before you get a payday loan, see if you can set up a payment plan with the company you owe money to. It can be awkward to talk to the company, but this is a better alternative than missing a payment. 

So, ask if you can put a payment plan in place as a payday loan alternative. You may be able to pay a portion of the payment now and the rest later. If you have federal student loans, you can call your loan servicer and see if you can defer your loans or put them in forbearance. You can also consider an income-driven repayment plan, where your monthly payments are lowered to a small portion of your discretionary income. 

The key is to take action and talk to your lenders about a payment plan to see what options are available. 

3. Borrow from a payday advance app

If you have a steady income and are looking for an advance on your paycheck, consider using a payday advance app. Payday advance apps offer more flexibility and affordability for borrowers than payday loans. The biggest difference between a typical payday loan and payday advance apps is that apps don’t charge any interest, because payday advances are not considered loans.

Payday advance apps, such as Earnin and Dave, will front you a portion of your upcoming paycheck without any interest. Fees are limited, though some apps allow you to tip voluntarily.

4. Dip into your savings

Building up savings is tough and can take a long time. When you finally grow your savings account, this can offer you a sense of security. If you’re lucky enough to have a robust savings account before you apply for a payday loan, consider dipping into your savings. 

This is one reason why you build a savings account to begin with. Things come up, and your savings can act like a buffer. Rebuilding your savings account, in turn, is better than paying back a payday loan. Taking money from your savings account is akin to taking a loan out for your future self. Wouldn’t you rather pay yourself back then a predatory lender that charges 400% payday loan interest rates on the loan?

5. Borrow money from family members or friends

This isn’t an option for everyone, but if you have trusted family or friends that can loan you money, consider borrowing from them. Will your parents loan you some money, interest-free? Do you have a close friend who can spot you just this once, while you get it together? 

If you do this, be clear on the amount and the timeframe in which you’ll pay them back. Going this route can be tricky, and you don’t want to burn any bridges or ruin relationships with family or friends, so consider it carefully. But if it’s an option with no strings attached, this can help you avoid a payday lender. 

6. Earn extra money with a side hustle

Cutting back is the first thing you should do if you need extra cash. But if you’ve cut back all that you can, your next step is to earn more money. If you have free time, you can start side hustling. A side hustle is a gig that you do on the side to earn more money; for example, I worked as a brand ambassador and freelance writer as a side hustle while I was paying off debt. 

There are many side hustles available, including babysitting, graphic design, dog walking, Uber, Postmates, etc. Find your passion, and zero in on your skills. 

7. Take out a personal loan from a bank or credit union

If you have debts to pay back or need to cover your basic expenses, you don’t want to turn to a payday loan as your first option. But you might wonder, “Where can I get a loan that doesn’t have such high interest rates?”

You can consider taking out a personal loan from a bank or credit union. If you have good credit, oftentimes a bank or credit union will offer a much lower rate than a payday loan lender. Can you get a loan with bad credit? It depends on the lender, but your approval odds might be diminished. 

A bank or credit union is a good option if the financial institution offers you a loan with a good rate and favorable repayment terms. 

8. Sell your stuff

Sometimes coming up with quick cash just requires a little creativity. One thing you can do is sell stuff you no longer want or need. Now is the time to declutter and get rid of everything that doesn’t spark joy! If you don’t really use it that much, let it go. 

You can sell your items on Facebook Marketplace, OfferUp, Poshmark, and Craigslist. Just think: Getting rid of your stuff can be just the thing you need to bring in some more money, helping you avoid a payday loan. 

9. Break out the credit card

While I’d never condone getting into credit card debt, if you’re thinking of going to a payday lender, your credit card is likely a better option. Although many credit card interest rates can be around 16% and up, this is still better than what payday loans offer. 

So, you’ll likely pay less interest if you use your credit card strategically. Just make sure you don’t max out your credit card as this will affect your credit utilization. This, in turn, can lower your credit score.

10. Use a line of credit 

Another option is to use a line of credit. Financial institutions may offer a line of credit that you can draw upon when you need funds. A line of credit is different from a loan in that there’s a set amount available that you can draw from. You only pay interest once you borrow the money. 

If a financial institution will offer you a line of credit, giving you quick access to capital, this can prevent you from resorting to a payday loan.