Payday loan alternatives

Skip the 391% APR. Better options exist.

Why payday loans cost so much, the cheaper alternatives that work, and a step-by-step plan to get out if you already have one.

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Updated October 17, 20268 min readFact-checked against primary sources

Stressed couple reviewing unpaid bills with a calculator at their kitchen table

Credit union PAL cap28% APRvs. about 391% for a typical payday loan

Key takeaways

A typical $15 per $100 payday fee equals about 391% APR.¹
Credit union PALs are capped at 28% APR with a $20 max application fee.²
Active-duty military are protected by a 36% Military APR cap.³

The problem

Why payday loans cost so much

Payday loans are due in one lump sum, usually in two weeks. When borrowers cannot repay, they pay another fee to roll the loan over, and the balance does not shrink.¹

Red = fees paid so far. Green = the $300 you still owe. Assumes a $15 fee per $100, rolled over every two weeks.

391%APR on a typical two-week payday loan¹

$15typical fee per $100 borrowed¹

10+loans a year for nearly half of borrowers¹

$360in fees after 8 two-week cycles on $300

Better options

Cheaper alternatives to payday loans

All of these cost less than a payday loan for most people.

Cheapest alternatives

Low cost

Credit union PALMax 28% APR, $20 max application fee, $200 to $2,000.²
Payment plan or hardship programOften free. Ask the company you owe before you borrow.
Military relief societiesInterest-free loans and grants for servicemembers and families.⁵

Good middle ground

Moderate cost

Small personal loanBanks averaged 11.90% APR on 24-month loans in August 2026.⁷
Secured or share-secured loanBacked by your savings. Easier approval and lower rates.
Local help through 2-1-1Free referrals to rent, utility and food assistance.⁶

Deep dive

Credit union payday alternative loans (PALs)

Federal credit unions can offer two types of small installment loans designed to replace payday loans.²

	PAL I	PAL II
Loan amount	$200 to $1,000	Up to $2,000
Maximum APR	28%	28%
Application fee	Up to $20	Up to $20
Repayment	Fully amortized installments	Fully amortized installments
Membership wait	Can require 1 month	None required

Rules set by the National Credit Union Administration for federal credit unions.² Not every credit union offers PALs, so ask.

Get out

Already have a payday loan? Here is how to get out

1
Stop the rollover
Each rollover adds a new fee without lowering what you owe. Make a plan to pay the loan off instead of renewing it.
2
Ask about a payment plan
Ask the lender whether your state requires an extended payment plan or offers one. Rules vary by state, so check with your state regulator.
3
Refinance with a cheaper loan
A credit union PAL (max 28% APR) or small personal loan can pay off the payday loan and spread repayment over months.²
Tip: Compare the total cost, not just the payment.
4
Get free counseling
A nonprofit credit counselor can help you build a budget and talk to creditors. The National Foundation for Credit Counseling lists agencies at nfcc.org.
5
Know your rights
Active-duty servicemembers and covered dependents are protected by a 36% Military APR cap.³ Many states also cap small-loan rates.⁴

Questions

Payday loan questions

Why are payday loans so expensive?

The fee looks small, typically $15 per $100, but it covers only about two weeks. Over a year that equals roughly 391% APR, and nearly half of borrowers take out more than 10 loans a year.¹

What is the best alternative to a payday loan?

For most people, a federal credit union payday alternative loan. It is capped at 28% APR with an application fee of no more than $20, and you repay it in installments.²

Are paycheck advance apps a safe alternative?

Be careful. The CFPB found fees on these apps averaged over 100% APR, and the average user took 27 advances a year.⁸

Is a car title loan better than a payday loan?

Usually not. Title loans average around 300% APR, and one in five borrowers had their car seized.⁹

Emergency cashFast options ranked by cost Loan optionsTen ways to borrow, compared Payday cost calculatorSee what a rollover really costs Avoid scamsSpot fake lenders

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Sources

Sources for this page

Official and primary sources only. Last reviewed October 17, 2026.

1

Consumer Reports AdvocacyCFPB findings
Summary of CFPB payday loan research
consumerreports.orgFees, APR and rollover data
2

America's Credit UnionsNCUA rules
Comparing PALs I and PALs II Loans
americascreditunions.orgLoan limits, terms and 28% cap
3

Consumer Financial Protection BureauFederal law
What is covered under the Military Lending Act?
consumerfinance.gov36% MAPR cap
4

National Consumer Law CenterState law research
State APR Caps for $500, $2,000 and $10,000 Installment Loans
nclc.orgDecember 18, 2025
5

VetRAFIMilitary guide
Military aid societies and emergency relief
vetrafi.comAER, NMCRS, AFAS, CGMA
6

United Way 211Nonprofit helpline
211 helpline: free, confidential referrals 24/7
unitedwayhouston.orgRent, utilities, food and more
7

Federal Reserve BoardOfficial statistics
Consumer Credit G.19
federalreserve.govReleased Oct 7, 2026 · August 2026 data
8

Associated Press via News4JaxCFPB findings
CFPB says paycheck-advance apps are providing loans
news4jax.comJuly 18, 2024
9

FINRA FoundationCFPB findings
Car Title Loans Can Take You for a Ride
finra.orgTitle loan costs and repossession
10

Consumer Financial Protection BureauRegulator guidance
What is a personal installment loan?
consumerfinance.govDefinition and terms