Payday Loan Alternatives: Safer, Cheaper Ways to Get Cash Fast

If you’ve ever struggled to stretch your paychecks between paydays, you know how the feeling of desperation can creep in. That feeling may lead you to something like a payday loan. We understand doing what you need to do to keep up with expenses, but there are payday loan alternatives that don’t have as many downsides. 

The main downsides of a payday loan are the high interest and how soon you need to pay it back (payday, which is no more than two weeks away). But if you need money, and you need it fast, you have several options. We’ll cover these alternate routes, which includes cash advance apps, personal loans and more, plus how to pick the best one for you.

Why Look for a Payday Loan Alternative?

Payday loans advertise themselves as a solution to money troubles, especially if you have bad credit, but it’s rarely the right choice. Payday loans can have interest rates from 400%-800%, so you end up owing way more than you borrowed in the first place. That’s not exactly an ideal scenario when you were struggling to stretch your income in the first place.

How to Compare Payday Loan Alternatives

The best payday alternatives will depend on what you need and if you qualify. When comparing, these are the criteria to look at:

• The cost: Will there be interest charges or fees?
• How much money you need: Some options will only get you a few hundred dollars, like cash advance apps. Options like personal loans can get you $50,000 or more. 
• Credit checks: Some of these alternatives have credit checks, while others don’t. 
• Funding speed: If you need emergency money, will you get it quickly? 
• Repayment options: If you can’t pay back the money by payday, you’ll need to be able to work out another plan. 
• Credit building: Is it something that reports to credit bureaus? 
• Lender reputation: Is it an established institution where other people have had positive experiences?

The Best Alternatives to Payday Loans

Payday loans aren’t the only way to close gaps in your income. Consider these alternatives before signing up for a high-interest option. 

Cash Advance and Earned-Wage Apps

For small, short-term help, cash advance or earned-wage apps like Earnin let you access a portion of money you’ve already earned before payday or borrow a small advance. You can usually do this without interest or a small optional fee, which is far cheaper than a payday loan. The advances are intentionally small — often capped at a few hundred dollars — and limits grow as you build a track record with the app. That’s why these are best for when you need a little money to help stretch your paycheck rather than pay for a large purchase or expensive emergency. 

Here’s our roundup of the best cash advance apps.

Personal Loans (Including for Bad Credit)

A personal loan from an online lender or marketplace is usually far cheaper than a payday loan and is good for larger amounts that you need more time to repay. They are often fixed-rate loans where the payment stays the same for the life of the loan, and the APRs fall far below payday loans most of the time. Your on-time payments will be reported to the credit bureaus as well, so it could boost your credit score in the long run. 

If you looked into payday loans because your credit score isn’t great, there are personal loan lenders that work with those with bad credit, though your rate may be higher because of it. You may even be able to get a personal loan with no credit check. It will likely still be below the rate of a payday loan, and you have more time to pay it back. You can find personal loans that meet your needs through marketplaces like AmOne that allow you to compare your options in one place.

Credit Union Payday Alternative Loans (PALs)

Federal credit unions offer payday alternative loans (PALs) designed to replace payday loans. They offer small-dollar amounts and a rate cap that’s far below payday lenders (28%), plus more time to repay. The application fee won’t be more than $20, and you may be able to borrow up to $1,000. You generally need to be a credit union member for a certain period of time first, but PALs are one of the cheapest fast-cash options for eligible borrowers. Plus, some credit unions offer financial counseling to their members.

Second-Chance Banking and Getting Paid Early

See if your bank or employer offer access to your paycheck early. This is different from an advance, where you’re asking for part of your check so you can pay it back on payday. Some banks, if your employer allows it, can simply get you your paycheck a few days earlier than normal. This option is better for people who are almost squeaking between paydays but need a little extra assistance. We also have a roundup of the best banks that pay early if you are thinking of switching or are not sure if your bank offers it. 

Non-Profit Charities

Tons of local and national charities exist to support people in need, including:

• Cash transfers: GiveDirectly puts cash in the hands of people around the world who need it. In most cases, the organization invites people from targeted communities to participate.
• Food banks: Feeding America operates a network of food banks around the U.S., which can give your household free groceries each week or month. Find your local Feeding America-affiliated food bank here or search for “food banks near [your city]” to find others.
• Tenant resource centers can help you enforce your rights as a tenant as well as direct you to rental assistance programs. Search for “tenant resource center in [your city]” to find resources near you.

Pawn Shop Loans (With or Without Selling Something)

You’re probably aware of the option of pawning items you own to put some money in your pocket. In many cases, you can then buy back your item from a pawn shop if you recoup your money before it sells to someone else.

Pawn shops in some areas also give out loans, using your pawnable items as collateral. Compared with secured personal loans, these are usually for a much lower amount, like $150, with terms of just one or two months. You won’t be charged an interest rate, but instead a flat fee that could compute to a pretty unattractive interest equivalent.

Credit Card Cash Advance

If you have a credit card with an available balance and need money for a rent payment or other cost you can’t pay directly with the card, you could pull out a cash advance against your available credit.

Check your credit card agreement (or summary in your online account) for details on cash advances. They’re often capped at a lower amount than your full credit limit, might come with a withdrawal fee and sometimes incur a higher interest rate than your normal credit card use.

Payday Loan Alternatives When You Already Have One

Here’s what you may be able to do if you can’t pay back a loan you already took out. 

Extended Payment Plan (EPP) With the Payday Lender

If you already have a payday loan you can’t repay, many states require payday lenders to offer an Extended Payment Plan. These plans offer a way to pay off the balance in installments without additional fees. It’s a free option worth asking for by name — just make sure to do so well before the due date.

Nonprofit Credit Counseling

Are you caught up in a payday loan cycle? A nonprofit credit counseling agency can review your budget for free, help you negotiate with lenders and set up a repayment plan. Basically, if your biggest issues are getting overwhelmed with managing your money and getting your finances on track after struggling with debt, these agencies are a solid choice. Choose an accredited agency so you don’t find yourself wrapped up in a scam. Here is our guide on how credit counseling works. 

Other Options

There are several other ways to get quick money if you need it:

• Ask your employer about a paycheck advance: The worst they can say is no. 
• Borrow from family or friends: Make sure the terms are clear and follow through with them. 
• Tap local assistance: You could dial 211 for community resources through United Way.
• Reach out to local charities: Local food banks may be able to help and rarely require proof of income.
• Ask a biller for a payment plan or hardship arrangement: If there are specific bills you’re having trouble paying, reach out directly to the company to ask about hardship options.

How to Avoid Needing a Payday Loan

If you don’t want to find yourself strapped for cash again (and really, who does) there are steps you can take to prevent it. Prioritize building your own emergency fund. They exist for this exact scenario — financial emergencies. Even if you can only start small, having your own emergency funds instead of borrowing them will put you in a better position. 

Start by automating your savings. That way the money goes straight into your emergency savings account without any extra effort from you. You also may want to take a second look at your budget. If you find yourself struggling to stretch your paycheck on a regular basis, something isn’t adding up. See where you can cut your spending, whether it’s discretionary or recurring costs (like finding a cheaper internet provider or cheaper car insurance). If trimming your spending isn’t an option, we have a list of the best side hustles that can help you boost your income.   

Frequently Asked Questions

Dana Miranda is a Certified Educator in Personal Finance®. She’s written about work and money for publications including Forbes, The New York Times, CNBC, The Motley Fool, The Penny Hoarder and a column for Inc. Magazine. She founded Healthy Rich to publish stories that illuminate the diversity of our relationships with work and money.