Payday Alternative Loans

Don’t know where to turn to with urgent expenses weighing down on your shoulders? Learn everything about PALs and how to apply for one in this guide.

$2,500
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What Are Payday Alternative Loans?

Payday alternative loans are simply short-term loans you can obtain from federal credit unions and repay within the next few months.

These loans have a maximum interest rate of 28% set by the National Credit Union Administration (NCUA). Credit unions may also have an application fee, but it’s usually a small amount, up to $20.

How to Be Eligible for a Payday Alternative Loan?

Getting a payday alternative loan isn’t as tough as people think. But first things first, you need to be a member of a credit union that offers PALs to qualify for one.

Search for credit unions in your local area. Before driving block to block and looking around for credit unions, a simple Google search can help you save hours. Eligibility requirements to become a member may differ, but you can find a website or a contact number to ask for them from your preferred credit union.

Unlike traditional lenders such as banks that may reject your loan application with one look at your bad credit score, credit unions don’t throw your application out of the window as likely.

There’s no minimum credit score requirement, so you can skip right ahead. As long as you have a monthly paycheck to take home and sound repayment capability, you’re good to go.

Are Payday Alternative Loans Safer? Why?

A payday alternative loan through credit unions can help your case in multiple ways.

In terms of benefits, credit unions have low interest rates that won’t empty your already-struggling balance and allow longer repayment periods for their members. While payday lenders are out to get you with one missed repayment date, you can extend repayments through credit unions without incurring hefty charges.

Most credit unions report every repayment to national credit bureaus. Your sole purpose may be getting a payday alternative loan, but with timely repayments, you can improve your credit score alongside.

Payday Alternative Loans vs. Payday Loans

Payday loans usually charge unbelievably high interest rates with short repayment periods. Even for a $100 payday loan, you may end up paying anywhere between $10-30 on top of the original amount as interest.

While that doesn’t sound like a lot, it’s a 300-600% APR on your loan! The repayment periods can be a pain, too, since you’ll have to repay the loan on your next payday or within a few weeks.

Unfortunately, payday loans can also trap you in a debt cycle. One missed repayment becomes a continuous process of incurring higher fees and interest charges until you finally turn in the full amount.

Imagine you’re already struggling to get back on your feet in the credit score area, and your lender only reports the one missed repayment to the national credit bureaus. That’s not an uncommon incident either.

On the other hand, payday alternative loans are more convenient even with bad credit. With a low interest rate and longer repayment periods, PALs could be a solution to your financial emergency without the troubles that come with payday loans.

Having to get a loan could be stressful, but on the bright side, PALs let you improve your credit score with regular repayment updates to the national credit bureaus.

Want to learn more about loans? Check out CocoLoan!

How Can I Apply for a Payday Alternative Loan?

Become a Credit Union Member

To apply for a PAL you’ll first have to join a credit union near you. Find credit unions according to where you live, the organization you’re working for, or belonging to a religious organization. Look through the eligibility requirements and fill in the forms.

Apply for a PAL

Once you’ve secured your position as a credit union member, you can apply for a payday alternative loan. The application process may require documentation for verification of repayment ability, including payslips and previous bank statements.

Receive the Funds

After your application is approved, you’ll receive the funds in cash or in your bank account within a few days. Make a financial plan to repay the loan timely.

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