When you’re unsure about your ability to pay back certain types of loans, payday alternative loans give you more flexibility. These loan types provide longer repayment periods and usually have lower interest rates than payday loans.
What happens if you can’t repay a payday loan on time? Are payday alternative loans a viable option for your situation? We’ll answer these questions and more to help you make an informed decision.
What Is a PAL Loan?
Short for payday alternative loans, PALs are small loans offered by credit unions.
PAL 1
These loans are typically capped at lower dollar amounts—often between $200 and $1,000—and must be repaid within a few months. Federal credit union loans of this type may charge an APR no higher than 28%, per NCUA guidelines, and application fees are generally limited. Some credit unions also require that you’ve been a member for a set time—often around one month—before applying.
PAL 2
If you need more money, the second type of PAL loan can give you up to $2,000. The repayment terms give you up to 12 months to pay it off. Application fee guidelines are the same for both.
Unlike the first loan type, you can become eligible once you’re a credit union member.
How Are Payday Alternative Loans Different from Payday Loans?
Should you try a payday loan or a payday alternative? Let’s compare and contrast these different loan types below.
- Credit unions offer payday alternative loans, while dedicated storefront lenders offer regular payday loans.
- Payday alternative loans provide lower interest rates and longer repayment periods, while payday loans have higher interest rates and shorter repayment periods.
- PALs require you to be a member of a credit union, while payday loans are easier to get because of their lack of strict requirements—often not even needing a credit check.
Why Are Payday Alternative Loans Safer Than a Payday Loan?
Sometimes you’re not sure how quickly you can pay back your loan. If you fall behind on your payments for a payday loan, your interest rates and fees will skyrocket to a much higher amount.
A payday alternative loan’s lower interest rates and longer repayment periods make it much easier to pay everything off without making your situation worse.
Sometimes people can overestimate their ability to pay, so we recommend the following tips to reduce the risks of nonpayment.
- Carefully tally your average monthly income, then set aside how much you can put back toward your loan. Cut out all unnecessary expenses, like snacks or clothing accessories.
- Read the terms and conditions of your loan carefully and don’t sign up for anything that makes you feel uncomfortable.
- Get a cosigner for your loan. It’s better to have a friend or family member pay what you owe in case you can’t. Instead of racking up late fees and interest, you can pay them back over time.
What Happens if You Can’t Repay a Payday Loan on Time?
Payday loans earned their name since the expectation is to pay them off by your next paycheck. If you can’t repay your payday loan on time, the following issues may happen:
- Interest and fees will be added to your existing balance.
- Your credit score will start dropping.
- You’ll receive debt collection notices, such as letters in the mail or phone calls.
- Your lender or bank may reach out to a debt collection attorney.
Where to Go When No One Will Give You a Loan
It’s understandable to be stressed when you’re low on time and struggling to get approved for a loan. You still have options to get financial help if you don’t qualify for payday alternative loans.
Buy Now, Pay Later
If you need help with a small payment, like a week’s worth of groceries or a late bill, double-check for Buy Now, Pay Later options. Also known as BNPL, several brands offer this feature in checkout to let you split your payment into smaller chunks.
Sign Up with a Cash Advance App
If you only need a few hundred dollars, cash advance apps like Brigit or Chime offer fast borrowing with low fees. They allow you to draw money past your credit limit and receive money within a few days.
Just like any other type of borrowing method, make sure to read the terms and conditions for repayment carefully.
Reach Out to Local Nonprofit Organizations
If you need help paying weekly or monthly expenses, local nonprofit organizations may be able to relieve your burden. These organizations usually specialize in a specific area, using donations and volunteer work to help people get through rough patches.
You can seek out local non-profit organizations in your city or town for help in areas like:
- Utilities
- Gas
- Groceries
- Medical payments
- Transportation
- Rent
- Clothing
There are still loan options you can try if you can’t get approval for payday alternative loans and the above options aren’t working. Power Finance Texas is an online resource for Texas residents who need installment loan options.
Power Finance Texas Is Ready to Help You with Your Loan Needs
If you have a Texas driver’s license and a job, we offer a simple online form to help you get installment loans. Our loans offer as soon as same-day funding of up to $1,250.
Submit an application for your loan today, and we’ll get back to you promptly.