When payday is still days away and an urgent expense appears, a payday loan may seem convenient. Unfortunately, short repayment periods and high charges can make these loans difficult to repay.
Some federal credit unions offer Payday Alternative Loans, known as PALs. These small-dollar loans are designed to provide qualifying members with an alternative to high-cost payday borrowing.
Under the PALs I program, eligible members may borrow between $200 and $1,000 for a term ranging from one to six months. The application fee can be no more than the credit union’s actual processing cost, up to $20. Membership and other eligibility requirements apply, and not every credit union offers the program.
Some institutions may provide other small personal loans instead. Compare the APR, payment amount, fees, repayment period and credit-reporting policy. Do not assume that every product advertised as a “payday alternative” is an official credit-union PAL.
The National Credit Union Administration’s consumer guidance also recommends considering creditor payment plans, employer advances and local assistance programs before using a high-cost payday loan.
Ask whether the credit union provides financial counseling. A counselor may help you create a manageable repayment plan and prepare for future emergencies.
Fast funding can be useful, but affordable repayment is more important. A carefully reviewed credit-union loan may provide the money you need without trapping your next paycheck.
