Payday loans can provide quick access to cash, but they can also be a costly way to borrow money. There are better alternatives to payday loans, including personal loans, cash advances and early paycheck access. Exploring other options can help you cover an immediate expense without expensive borrowing even if you have bad credit.
| Funding Speed | Credit Requirement | Best For | |
|---|---|---|---|
| Payday alternative loan (PAL) | Same or next business day | Poor credit may be accepted | Small, unexpected expenses |
| Bad credit personal loan | Same day to five business days | Poor credit may be accepted | Larger, unexpected expenses |
| Credit card cash advance | Same day | Existing credit card required | Small, immediate cash needs |
| Borrowing from friends and family | Potentially immediately | None | Emergencies and unexpected expenses |
| Early direct deposit | Up to two days before payday | None | Expenses due before payday |
Funding speeds for some options vary by lender, financial institution and application timing.
Why Should I Avoid Payday Loans?
While payday loans are relatively easy to get—many lenders don't require a credit check or proof of income—there are several drawbacks.
- High borrowing cost: Payday loans can be one of the most expensive ways to borrow money. Finance charges can range from $10 to $30 per $100 borrowed depending on your state law. The actual cost of a payday loan varies by lender and state.
- Short repayment period: While repayment terms vary by state and lender, you typically have two to four weeks to repay a payday loan. A short repayment period can make it difficult to repay the loan while covering your regular expenses, and that can lead to a cycle of increasing debt.
- Low loan amounts: You can typically only borrow a relatively small amount of money, usually up to $500, although states regulate borrowing limits.
- Potential rollover fees: If you can't repay the loan when it's due, you may be able to renew or roll the loan, depending on state law and the lender's policies. However, you may have to pay additional fees each time you renew the loan. Repeated rollovers can make an expensive loan even more costly.
- Limited availability: Payday loans aren't available everywhere. Some states ban payday loans, while others put restrictions on loan amounts, fees, interest rates or repayment terms.
What Are Better Alternatives to Payday Loans?
If you need money quickly, there are several alternatives that may better fit your situation.
1. Payday Alternative Loan (PAL)
Some federal credit unions offer payday alternative loans (PALs), which can be used to cover an unexpected expense or pay off an existing payday loan. PALs give borrowers more time to repay than payday loans and limit the fees lenders can charge.
PAL amounts can range from $200 to $1,000, with repayment terms between one and six months. Credit unions can charge an application fee of up to $20, and borrowers can take out up to three PALs in a six-month period, as long as no PAL overlaps or rolls over.
Not every credit union offers PALs, and you need to have been a member of the credit union for a certain amount of time before applying.
Best for: Small, unexpected expenses that you need more than a few weeks to repay.
2. Bad-Credit Personal Loan
You may be able to qualify for a personal loan even with a low credit score. Some lenders offer personal loans to borrowers with less-than-perfect credit. Loan amounts may range from several hundred to several thousand dollars.
However, personal loans for bad credit can have relatively high annual percentage rates (APRs) and may come with origination or other fees too.
Applying with a cosigner or offering collateral may improve your chances of approval or help you qualify for a larger loan amount or lower interest rate. Keep in mind that a cosigner becomes responsible for the loan if you can't repay and a secured loan puts your collateral at risk of you default.
Best for: Larger unexpected expenses, like a major car repair or medical bill, when you need several months to repay.
3. Borrowing From Family or Friends
If you're in a financial bind, borrowing from family or friends may allow you to avoid the high costs of a payday loan. Depending on the arrangement, you may be able to borrow with little to no interest.
Even though you're borrowing from someone you know, consider putting the loan agreement in writing. Include the amount you're borrowing, any interest or fees, payment amounts and repayment dates.
Failing to repay a loan from family or friends generally won't hurt your credit, but it could damage your relationship. In some circumstances, a lender could pursue legal action to recover the money.
Best for: Emergencies and urgent expenses when you need money quickly.
4. Payday and Cash Advance Apps
Some apps allow eligible consumers to access a portion of their expected wages before payday based on income and direct deposit history. These payday and cash advance apps use your bank information to estimate cash flow and determine how much you can advance.
Loan amounts are typically relatively small. Depending on the app, you may be able to receive funds within minutes for a fee or choose a standard transfer that takes longer.
The amount you access is generally repaid from your upcoming paycheck or withdrawn from your bank account on a scheduled date. Review the provider's fees and terms carefully before borrowing.
Best for: Small, short-term expenses or upcoming bills when you need to bridge a short gap until payday.
5. Credit Card Cash Advance
If you already have an available cash advance limit on a credit card, you may be able to withdraw cash or transfer money from your credit card. Cash advances typically have a higher APR than regular credit card purchases, and interest typically starts accruing immediately rather than a grace period.
You may also pay a cash advance fee, typically around 5% of the cash advance amount or a minimum dollar amount, whichever is greater. A cash advance can be expensive, but may cost less than a payday loan depending on your card's terms.
Best for: Small, immediate expenses when you already have an available credit line and can repay the balance quickly.
Learn more: What's a Cash Advance Fee on a Credit Card?
6. Buy Now, Pay Later
Buy now, pay later (BNPL) services allow you to split the cost of an eligible purchase into multiple payments. While BNPL doesn't directly provide cash, financing an eligible purchase may allow you to save cash for another immediate expense.
There's no credit check for BNPL and you won't be charged interest, but missed payments may be charged a late fee or interest. Be careful about borrowing too much. If you don't have enough money to cover expenses today, consider whether you'll be able to afford the BNPL payments when they do come due, typically over the course of six to eight weeks.
Best for: Essential purchases, such as household items or groceries, that qualify for BNPL when you have limited cash.
7. Make More From an Existing Side Hustle
If you already have a side hustle, freelance business or other source of extra income, look for ways to increase your earnings before turning to a payday loan. You might be able to take on more work, expand to another platform or offer a limited-time promotion to generate additional income.
Example: Delivery drivers can sign up for another delivery platform for more delivery opportunities. Freelancers and other service providers can offer a limited-time discount with payment due upfront. A tutor could offer additional sessions or a prepaid package.
Best for: Expenses due in the next few days when you can quickly earn extra income from an existing side hustle.
8. Early Direct Deposit
Some banks, credit unions and fintech companies offer early direct deposit, which may allow you to access your paycheck up to two days before your scheduled payday. Because you're receiving your regular paycheck, there's no loan to repay.
Early direct deposit generally requires you to receive qualifying direct deposits into an eligible account. The timing of your paycheck may also depend on when your employer submits payroll information.
Best for: Covering expenses that are due a day or two before your regular payday.
9. Earned Wage Access
Earned wage access (EWA) programs allow eligible employees to access a portion of their earned wages before payday. As you work, you can access some of the wages you've already earned, subject to the provider's limits and terms.
Any amount you access is generally deducted from your next paycheck. Some EWA providers offer no-cost withdrawals, while others may charge fees, especially for expedited transfers.
If you need additional money before your next paycheck, you may also be able to work additional hours or take an extra shift, if your employer allows it.
Best for: Unexpected expenses or bills that are due in the next few days.
10. Contact Your Creditors
If you're struggling to make a payment, contact the creditor before the payment is due. Depending on the company, you may be able to request a different due date, fee waiver, hardship arrangement or another accommodation that makes it easier to make your payment.
Best for: Bills you can't afford to pay by the due date, such as a credit card, medical or utility bill.
11. Emergency Assistance Programs
If you need help paying for basic necessities, look for assistance programs before taking on high-cost debt. Local nonprofits, government agencies and community organizations may offer assistance with essential expenses like food, housing, utilities or transportation. You can dial 211 to find programs you're eligible for.
Best for: Covering essential expenses such as housing, groceries and transportation.
Learn more: How to Get Emergency Money
The Bottom Line
Payday loans can provide quick access to cash, but their costs and short repayment period can make them hard to repay. Before taking out a payday loan, consider alternative ways to cover expenses or accessing money at a lower cost. The best alternative depends on how much money you need, how quickly you need it, your credit and income and how soon you can afford to repay what you borrow.
If you're in need of a loan, check your credit report and FICO® Score☉ Θ for free from Experian to see where you stand. You also can visit Experian's loan comparison platform to find loans matched to your unique credit profile.