Updated
May 09, 2023 Payday loans are short-term loans with sky-high interest rates and hefty fees. Lenders offering them typically target borrowers in dire financial circumstances with few other options.
Payday loans are a high-risk, expensive option because of how they’re structured. Not only do they come with costly interest and fees, but they can put borrowers into a neverending cycle of debt.
You may have better options if you’re struggling and need cash to cover an unexpected cost. Here are some lower-risk payday loan alternatives worth considering.
In this guide:
- How payday loans work and why to avoid them
- Payday loan alternatives
- Recommended payday loan alternatives for bad credit
- Payday loan alternatives for good credit or recurring payments
- Payday loan alternatives we don’t recommend
How payday loans work and why you should avoid them
Payday loans are expensive, short-term borrowing options. These loans are often small, up to $500, but they come with APRs of up to 400%, making them difficult to repay.
Unlike traditional loans that often require borrowers to have good credit to qualify, payday loans don’t have such requirements. You can often get approved with bad or no credit. The only requirement is repaying the loan when you get your next paycheck.
As a condition of approval, you may need to provide your bank account information and give the lender permission to debit your account for the loan balance. Some lenders may also accept backdated checks.
The significant downside of payday loans comes with their exorbitant costs due to interest and fees. Consider this example:
- You borrow $500 from a payday lender.
- The loan comes with 350% APR.
- When you repay it in two weeks on your next payday, you pay $67.12 in fees and interest.
Compare that to:
- You take a $500 cash advance on a credit card.
- The card has a 28% APR for cash advances.
- When you repay the advance in two weeks, you pay $5.37 in interest.
Payday loan alternatives to consider
Given the costs and risks associated with payday loans, it’s essential to consider alternatives first. Some options may be feasible even if you have bad credit—which is a credit score below 580—or need fast funds to cover an emergency cost.
To aid in comparing payday loan alternatives, we’ve created this quick-reference table to help you identify the right financing solution. We’ve indicated which options are accessible to borrowers with poor credit and ordered them based on how fast you can expect the funds.
If you’re considering a payday loan, chances are you need money quickly. Many fast financing options come with high interest rates or hidden fees. Consider our ability to add a new payment to your budget.
You should explore options that provide the financial relief you need without taking on new debt. Therefore, below the table, you can find our ranking of the alternatives from most to least recommended, as well as the important considerations of each type and who each is best for.
| Payday loan alternative | Bad-credit eligible? | Speed of funds |
| Cash advance app | ✓ | Instant, depending on the app and for an extra fee |
| Credit card payment or cash advance | ✓ (if you have available balance) | Instant |
| Family member or friend loan | ✓ | Varies, but can be instant |
| Bill or payment plan negotiation | ✓ (depends on lender) | Varies, but can be instant |
| Paycheck advance | ✓ (depends on employer) | Varies, but can be instant |
| Payday alternative loan (PAL) | ✓ | 1 – 2 days, if you are a member of a federal credit union |
| Bad-credit loan | ✓ | 1 – 4 days, depending on the lender |
| Secured personal loan or line of credit | ✓ (depends on lender) | 1 – 4 days, depending on the lender |
| Unsecured personal loan | ✓ (with cosigner) | 1 – 4 days, depending on the lender |
| Secured credit card | ✓ | 7 – 10 business days |
| Low-rate credit card or balance transfer | 1 – 2 weeks | |
| Renegotiation of debt terms | ✓ (depends on lender) | Varies |
| Deferment or forbearance on a loan | ✓ (depends on lender) | Varies |
| Debt consolidation | ✓ (better credit will get you better rates) | Depends on financing type |
Recommended payday loan alternatives for bad credit
With timing, rates, and debt management in mind, we’ve ranked our alternatives for bad-credit borrowers from most to least recommended.
Family member or friend loan
If you’re struggling to manage an unexpected cost, consider requesting a short-term loan from a trusted family member or friend. This could be a smart solution to keep extra costs down.
Work out a structured repayment plan that makes sense for both parties, and discuss whether you’ll pay interest. Just ensure you can repay the loan as agreed, or it could damage your relationship with that person.
- Best for: No or low-interest financing
- Speed of funds: Varies but could be instant
- What to know: It may be uncomfortable to request a loan from a loved one, but it can be a desirable solution in many cases. You could benefit from no interest or a lower rate than you’d get by borrowing from a traditional lender.
Bill or payment plan negotiation
In some cases, negotiating a bill or payment plan with a service provider or lender can result in instant and long-term financial relief. It may be possible to reset payment due dates, make smaller payments over time to pay off a balance, or even negotiate a lower interest rate.
Credit card issuers may lower your interest rate but prevent you from borrowing against that card any longer. This can be a good solution for lowering your overall payments, but it can limit your access to credit.
Contact the billing or lending department to negotiate a bill or payment plan. Discuss your financial situation, and ask whether options are available to help you better manage your payments.
- Best for: Reducing payments
- Speed of funds: Relief could be instant if a payment due date on a bill is extended; it can also help with budgeting in the long term
- What to know: Some lenders or service providers may be more willing to work with you than others. Still, you shouldn’t be afraid to negotiate. The outcome might surprise you.
Paycheck advance from your employer
A paycheck advance, also called a salary or wage advance, from an employer is often a small loan to serve as an advanced payment of your current earned wages. Your employer pays a portion of your paycheck early and deducts the borrowed amount from future paychecks.
Employers may not offer this option, but if it’s available, it can be useful to explore in a financial emergency before pursuing a payday loan.
- Best for: Emergencies
- Speed of funds: Varies by employer
- What to know: Most paycheck advances from an employer are interest-free, and you can request them through your manager or HR department. Some employers limit how much you can borrow or how often you can take paycheck advances.
Secured personal loan or line of credit
While many personal loans are unsecured, meaning lenders approve the loan based only on borrower creditworthiness, some are secured. As their name suggests, secured loans are “secured” by an asset, such as your car, home, or savings account.
Loan amounts vary by lender, and secured loans can come from traditional banks, credit unions, and online lenders.
Because they’re secured with collateral, these personal loans often come with more flexible credit score requirements than unsecured loans. They also tend to have lower interest rates.
But if you default, your lender could place a lien on your collateral, so it’s important to ensure you make your loan payments on time and in full.
- Best for: Fast funding and low rates
- Speed of funds: 1 – 4 days, depending on lender
- What to know: Secured loans or credit lines are only a good option if you’re confident you can make your monthly loan payments. If you get behind, your lender could seize your collateral, and the missed payments will harm your credit score.
Unsecured personal loan with cosigner
Many traditional banks, credit unions, and online lenders will accept poor credit on an unsecured personal loan application with the addition of a cosigner with good or excellent credit.
In these instances, the bank will consider your cosigner’s credit in addition to your own during the loan decision process.
Depending on the lender, you may be able to get a large unsecured personal loan if you use a cosigner, so this could be a wise option if you are facing a sizable expense.
- Best for: Fast funding and large expenses
- Speed of funds: 1 – 4 days, depending on lender
- What to know: If you default on your loan, your cosigner will be responsible for repaying it. This could damage your relationship, so we only recommend working with a cosigner if you’re confident you can repay the loan.
Payday alternative loan (PAL)
Federal credit unions may offer PALs to customers who have been members for a month or more. These loans are often small (up to $1,000) and short, with loan terms ranging from one to six months.
PALs are an alternative to traditional payday loans that offer borrowers lower rates, predictable monthly payments, and more manageable fees. The credit union only charges an application processing fee of up to $20.
PAL interest rates are capped at 28% and can be a suitable alternative for those who qualify, but they aren’t the lowest-rate alternative available.
- Best for: Members of qualifying credit unions with steady earnings
- Speed of funds: 1 – 2 days if you’re a member of a federal credit union offering these loans
- What to know: You may not need good credit to qualify for a PAL, but you’ll likely need a reliable income to prove you can repay the loan each month.
Secured credit card
Like secured personal loans, secured credit cards often require collateral in the form of a refundable security deposit, which can vary depending on your card issuer. The typical deposit is equal to your credit limit.
If you have poor credit, secured credit cards can be an option to build credit and repay a purchase over a longer period. However, you’ll need a security deposit saved to qualify.
- Best for: Building credit
- Speed of funds: 7 – 10 business days
- What to know: If you fail to make payments on a secured credit card, the card issuer can raise your interest rate, charge you late fees, or even take your security deposit.
Credit card payment or cash advance
If you have an available balance, you could use a credit card to cover an unexpected cost. You’ll want to repay the balance by the end of your current statement cycle to avoid paying interest on the charge.
Credit cards come with higher APRs—around 19% as of April 2023. Carrying a balance month to month could result in hefty fees and interest charges.
Taking a cash advance on your credit card is also possible, but many cash advances have higher rates than regular purchases. In addition, many credit card companies will apply payments to lower-APR purchases first, resulting in high interest charges on your cash advance for a longer period.
- Best for: Cardholders who can repay their balances in 30 days
- Speed of funds: Instant if you have a credit card with an available balance
- What to know: If possible, use your credit card to make your purchase, and avoid taking a cash advance on your card to save on interest charges.
Cash advance app
Cash advance apps let you take a small loan against your future paychecks. Options such as Earnin, MoneyLion, Brigit, and Chime can offer fast cash in an emergency, but they can come with high fees for subscriptions, transfers, and instant funding.
It’s best to consider other options before turning to a cash advance app to keep your borrowing costs low.
- Best for: Those looking for fast funding who don’t mind paying fees
- Speed of funds: Instant, depending on the app and often for an extra fee
- What to know: You may need to connect your bank account to the cash advance app, depending on the one you choose. The app can then withdraw loan payments from your account, which could result in overdraft fees if you don’t have funds available.
Bad-credit loan
Bad-credit loans may be worth considering if you’ve exhausted the financing options we mentioned above. While these loans offer flexible borrowing criteria, interest rates can be high.
Opploans, for example, offers a personal loan as a payday loan alternative. It doesn’t perform a hard credit check and offers same-day funding—but APRs can hit 199%.
You can find several bad-credit loans online, but do your due diligence to find the best option. Compare lenders, and research rates and repayment terms. Don’t be afraid to negotiate for better ones.
Read the fine print before you apply to ensure you won’t pay any hidden fees or be subject to interest rate increases.
- Best for: Those who’ve exhausted other financing options
- Speed of funds: 1 – 4 days, depending on the lender
- What to know: Watch out for high APRs and hidden costs if you’re considering a bad credit loan. Stick with reputable lenders offering clear rates and terms.
Payday loan alternatives for good credit or recurring payments
If your situation is less about facing an emergency expense and more of a monthly cash flow issue, you may have other options to get your budget under control—particularly if you have decent credit.
The following are payday loan alternatives for recurring payments. Note that we’ve once again ranked these options from most to least recommended.
Renegotiation of debt terms
If you’re struggling to manage your debt payments, you could try renegotiating the terms of your debt with your lender, whether it’s a bank, credit union, or credit card issuer.
You might request a lower interest rate, a longer repayment term, or more manageable monthly payments. This option could be a solid starting point to improve your financial situation, and you likely won’t need excellent credit.
Renegotiating the terms of your debt is different from a debt settlement, which is when you negotiate down the debt you owe. Settling your debt could harm your credit.
- Best for: Borrowers who want to remain with their lender and lower their payments
- Speed of funds: Varies depending on negotiations, but you could see a lower monthly payment as soon as on your next statement
- What to know: Not all lenders will be open to negotiation but some may. In general, lenders want to ensure their loans are repaid and may be willing to work with borrowers if it increases the likelihood of repayment.
Debt consolidation
Debt consolidation can be another option if you want to lower your monthly debt obligations. Consolidating debt involves replacing high-interest debt, such as credit card debt, with a lower-interest loan. The result is often lower monthly payments.
If you go this route, common options for debt consolidation include personal loans and home equity loans. You can obtain these types of loans through traditional banks, credit unions, and online lenders. You often need good credit to qualify for the best rates for these products.
- Best for: Borrowers with decent credit
- Speed of funds: Varies but often not immediate
- What to know: Most lenders require good credit to approve you for a home equity loan or personal loan without a cosigner. If you don’t have concerns about your credit, debt consolidation can be a wise choice.
>>Read more: Medical debt consolidation
Low-rate credit card or balance transfer
Another option if you have good or excellent credit is opening a credit card with a 0% introductory APR. These cards offer a deferred interest period of 12 to 21 months, meaning you won’t pay interest on your purchases if you repay your full balance before the deferred interest period ends.
Certain cards offer intro APRs on new purchases only, balance transfers only, or both. The right option for you will depend on your needs.
- Best for: Those with good to excellent credit looking for a low-rate option
- Speed of funds: 1 – 2 weeks
- What to know: Most credit card issuers require higher credit scores to qualify for a 0% introductory APR credit card.
Deferment or forbearance on a loan
It is possible to defer a student loan due to economic hardship, allowing you to pause payments. You may defer federal student loans for up to three years.
Some federal student loans won’t accrue interest on your loan balance during deferment. Others will continue to accrue, and you are responsible for paying that interest.
Student loan forbearance allows you to modify or pause student loan payments for up to 12 months, but interest continues to accrue on your balance. Forbearance may be possible with other loans—such as mortgages—as well.
With student loan deferment and forbearance, you must submit a request to your student loan servicer and be approved before you stop making payments.
- Best for: Borrowers with student loans enduring financial hardship
- Speed of funds: Varies but requires you to submit request documentation and be approved
- What to know: Deferment and forbearance can offer relief during times of financial hardship. But you should view these as temporary solutions, especially if interest accrues.
Least recommended payday loan alternatives
If you’re looking for quick financing, payday loans are unwise. But we also don’t recommend the following options.
Pawnshop loan
Pawnshop loans often require you to bring an asset of value to a pawnshop as collateral. The shop assesses the item’s value and issues you a loan for that amount. To reclaim your asset, you must repay the loan—plus interest and fees—within the payback period.
Like payday loans, pawnshop loans often have high fees and interest rates—APRs can be around 200%—with 30- to 60-day repayment periods.
Given their high costs, pawnshop loans aren’t much better than payday loans, and it’s best to avoid this financing option if you can.
Overdraft protection
Overdraft protection is a service certain banks offer that lets you link another bank account or credit line to your primary account to ensure your purchases aren’t declined if your account balance gets low.
While this may sound positive, banks often charge fees for overdraft transfers—and some charge multiple daily fees if you overdraft on more than one purchase.
Fees can add up in a hurry, making this a poor option to rely on when you’re tight on funds waiting for your next payday.