Payday Loan Alternatives: 8 Safer Ways to Borrow Money

Key takeaways

• Payday loan alternatives include personal loans, Cash Line™ (A revolving line of credit through Upstart), credit union PALs, cash advance apps, and borrowing from family, friends, or an employer.
• Most alternatives cost far less than a payday loan’s APR of 400% or more, and several let you check your eligibility with a soft credit pull that won’t affect your credit score.
• Compare speed to funds, cost, and credit requirements before choosing, since the right fit depends on how quickly you need the money and how you plan to pay it back.

A payday loan alternative is any type of borrowing arrangement that allows you to avoid the high fees and interest rates of a payday loan. Payday loans often come with APRs of 400% or even more, and are typically the most expensive option available. 

Of course, not all of these are appropriate (or available) for everyone. But it’s important to research your alternatives and compare them before you decide to get a payday loan, which often comes with a ridiculously high cost of borrowing. 

In this article, we’ll discuss the most common alternatives to payday loans, and how to determine which might be the best choice for your borrowing needs.

8 Payday Loan Alternatives to Consider Before You Borrow

There are several alternatives to payday loans, including personal loans, a line of credit like Cash Line™ through Upstart, credit union PALs (payday alternative loans), cash advances on credit cards or apps, or borrowing from friends or family. 

Expanding a bit on the categories shows eight solid options for payday loan alternatives:

• Personal loans
• Personal lines of credit (such as Cash Line™ through Upstart)
• Borrowing money from friends and family
• Credit union PALs
• Credit card cash advances
• App-based cash advances
• Workplace cash advances
• Negotiating directly with the creditor

It’s worth noting that the last one isn’t technically a loan or a form of borrowing, but it still deserves a spot on the list of top payday loan alternatives. You might be surprised at how much certain creditors are willing to work with borrowers who are making a good-faith effort to pay what they owe. 

Of course, there are others that are very specific to your situation. For example, you may have access to community assistance programs, or, if your workplace retirement plan allows it, you may be able to take a 401(k) loan. 

In nearly all cases, if even one of these alternatives is available to you, it is likely to be significantly cheaper than using a payday loan. 

Payday Loan Alternatives Compared: Speed, Cost, and Credit Requirements

We’ll get into the details of some of the top payday loan alternatives in a bit, but first, here’s a side-by-side comparison to help get you started. 

Alternative	Speed to Funds	Cost/APR (typical range)	Credit Check	Typical Eligibility
Personal loan	1-3 days	Up to 37%	Soft to prequalify, hard to apply	Wide credit range and loan limits
Personal line of credit (PLOC)	Instant to a few days once approved	Roughly 10%–36% APR, sometimes with an annual or monthly fee instead of (or in addition to) interest	Soft to prequalify	Generally fair to good credit plus verified income
Cash advance app	Instant to 2 days	Flat fee, reasonable	None	Verified Income, borrow $25 to $500
Credit Union PAL I	As little as one day	28% APR cap	Soft or none	Member of credit union, $200-$1,000
Credit Union PAL II	As little as one day	28% APR cap	Soft or none	Member of credit union, up to $2,000
Family/Employer Advance	Immediate to next payday	Often $0	None	Varies

A Personal Loan for Bad Credit

A personal loan is a broad term for a typically unsecured installment loan backed by no specific assets. An installment loan is one on which you make a series of equal payments until it’s repaid, and a typically unsecured loan is one that isn’t tied to an asset like a home or a car. 

Personal loans generally have terms ranging from several months to a few years, giving you a longer, more manageable repayment period than a payday loan, which typically needs to be repaid within a few weeks. Not only that, even bad-credit personal loans typically have APRs of 37% or less. Compare that to payday loans, which often have APRs of 400% or so. 

Even with bad credit, a personal loan can still be a viable option for you. For example, you could consider a platform like Upstart, which considers many factors other than your credit score, such as your income and employment. You can see your estimated rate and terms before committing to a full application, all without affecting your credit score¹. Personal loans for bad credit through Upstart are worth exploring.

A Personal Line of Credit App (Cash Line™)

A personal line of credit app is somewhat of a hybrid between a personal loan and a credit card. Cash Line™, a personal line of credit through Upstart, is available in the Upstart app, with key advantages over a payday loan. 

For one thing, you have revolving access to credit in exchange for a low monthly fee. Payback typically happens over 2 to 6 weeks, based on your billing cycle, and you can draw only what you need from your approved credit line. 

Even if you have bad credit according to traditional metrics like the FICO® Score, you may still be eligible for Cash Line™. Upstart’s model considers numerous factors beyond your credit score, so if you’re looking for a flexible way to meet a short-term funding need, it could be a solid payday loan alternative. Get Cash Line™ in the Upstart app to see if it’s available in your state.

Credit Union Payday Alternative Loans (PALs)

Many credit unions offer a specific financial product designed to protect their members from the high interest rates and fees charged by payday lenders. These are called Credit Union Payday Alternative Loans, or PALs. 

A PAL is generally shorter-term than a standard personal loan, though its repayment term is longer than a typical payday loan’s. Typically, a PAL for $200 to $1,000 is repaid over one to six months, while larger PALs of up to $2,000 are repaid over terms as long as 12 months. 

These often have loose credit standards and are rather easy to qualify for. The biggest limiting factor is that you must be a member of the credit union, often for a certain period, before you are eligible for a PAL. 

Credit Card Cash Advances

A credit card cash advance lets you pull cash against your card’s credit line, usually through an ATM or a convenience check from your card issuer. It comes at a real cost: most issuers charge an upfront fee of 3% to 5% of the amount withdrawn, often with a $10 minimum, and the cash advance APR typically runs several points higher than your purchase APR.

There’s no grace period on a cash advance. Interest starts accruing the day you take it out, even if you pay it off before your statement closes. Most cards also cap how much you can draw as a cash advance to a fraction of your overall limit, commonly 20% to 30%.

If you’re only making minimum payments on an existing balance, card issuers can apply that payment to your lowest-APR balance first, which means your new cash advance keeps accruing interest largely untouched. A credit card cash advance still typically costs far less than a payday loan’s 400%-plus APR, but it’s rarely the cheapest option on this list if you have a lower-cost alternative available.

Cash Advance Apps

There are cash advance apps that provide relatively small advances against an upcoming paycheck, typically ranging from $25 to $500. Instead of charging interest on these loans, most cash advance apps charge subscription fees that members pay on an ongoing basis in exchange for access to advances as needed.

One feature of cash advance apps is that they often have little to no credit score requirements, as long as the borrower has verified income that allows them to repay the advance. 

Borrowing From Family, Friends, or an Employer

Not everyone has the option to borrow money from family or friends, and many employers don’t offer paycheck advance programs. But if this option is available to you, it’s certainly worth considering. 

Negotiating Directly With Your Creditor

If you’re behind on a bill or think you will be, call your creditor before the due date and ask about hardship options directly. Many billers, including utility companies, medical providers, and landlords, have formal programs that let you skip a payment, extend your due date, or set up a short repayment plan, often at no extra cost.

A short extension of 5 to 14 days is common, and some creditors will spread what you owe over 2 to 3 billing cycles instead of requiring it all at once. Ask specifically for a “hardship” or “financial difficulty” program by name. Many companies have one, but reps don’t always mention it unless you ask.

This won’t work with every creditor, and it depends on your payment history and how far past due you already are. It costs nothing to ask, though, and it can buy you time without taking on new debt at a payday loan’s typical APR.

Which Payday Loan Alternative Fits Your Situation?

The next step is to figure out which payday loan alternatives are available to you. Here’s a quick guide to help make your short list: 

• Are you a member of a credit union in good standing, and does your credit union offer PALs?
• Do you need the money right now, or can you wait a day or two? The answer to this question may rule out a few of the options we’ve discussed. 
• When will you be able to pay the money back? If you can reasonably repay it by your next payday, it’s a different situation than if small installment payments are more realistic. 
• Do you have a family member or friend willing to loan you the money? If so, this is often the most cost-effective route.
• Does your employer have a paycheck advance program? If you aren’t sure, ask your payroll department.
• Do you have fair credit, bad credit, or no credit at all? If you aren’t sure, there are several options we’ve discussed that let you check your eligibility with a soft credit pull¹, including checking your terms on loans through Upstart’s platform. 

Based on the answers to these questions, you can make a short list of payday loan alternatives you may be eligible for. Check your eligibility with those that allow you to do so using a soft credit pull, compare the fees and/or APRs of the options available to you, and choose the best fit for your situation. In almost every case, there’s an option that is preferable to using a payday loan. 

FAQ

1. What credit score do you need to qualify for a payday loan alternative?

The credit score requirements for a payday loan alternative can vary widely depending on the options available. Some alternatives have no minimum credit score requirement at all, using factors like income to determine eligibility. 

2. Can you get a payday loan alternative with a 500 credit score?

In many cases, yes — you can get a payday loan alternative with a 500 credit score. Cash advance apps, credit union PALs, and bad-credit personal loans are specifically designed for situations like this. 

3. Does applying for a payday loan alternative hurt your credit score?

Most payday loan alternatives that require an application allow you to prequalify using a soft credit pull, which doesn’t affect your credit score. If you complete a full application, a hard credit inquiry may be required, but checking your terms and eligibility should not require one. 

4. How fast can you get money from a payday loan alternative?

In some cases, you may be able to get money instantly⁸ from a payday loan alternative, such as a cash advance app or Cash Line^TM. Some options, such as bad-credit personal loans, often provide same-day funding, while others can take a day or two. 

5. Are payday loan alternatives safer than payday loans?

Payday loan alternatives typically have far lower APRs and longer repayment windows than you’ll find with payday loans. A lower cost structure and additional time to repay can be valuable tools for breaking a cash shortfall cycle. 

6. Can you get a payday loan alternative with no credit history?

In many cases, yes — some payday loan alternative options work with little or no credit history. A cash advance app, for example, may only rely on verified income and a linked bank account. Plus, some lenders consider numerous factors beyond credit score alone. 

7. Is a cash advance app a good alternative to a payday loan?

Cash advance apps usually cost far less than payday loans. They tend to be good alternatives for minor cash shortfalls, while personal loans and other options tend to be better for recurring or larger expenses.