8 Practical Alternatives to Payday Loans

Payday loans are usually a borrower’s last resort. If you’re considering one, you’ve probably exhausted most of the traditional and easy means of financial support already, so it may seem like there are no more practical alternatives to payday loans for you.

But there are viable options out there, even if your circumstances are making you feel trapped and desperate. You can almost always avoid predatory lenders, payday loans, and the excessive fees that come with them. So before you resort to taking out a payday loan, consider these alternatives first.

1.  Peer-to-Peer (P2P) Lending Apps

P2P lending apps, like SoLo Funds, connect borrowers with individual lenders, who can be less risk-averse than banks and more likely to lend to less qualified borrowers. 

Getting financing from an individual has three main benefits:

  • Quick application and approval processes
  • Flexible qualification requirements
  • Relatively affordable rates

You can apply online for a P2P loan in just a few minutes. Lending platforms will use some initial background information like your income, employment history, and outstanding debts to provide a list of possible loan options, usually within a few days.

Here are examples of some lending apps’ loan terms and credit requirements:


If you like one of the options that are offered, you’ll usually need to submit to an additional hard credit check, but then you can expect to receive your funding within a couple of weeks.

2. Paycheck Advances

Paycheck advances, also known as cash advances, allow you early access to money that you’ve earned but not yet received. They make the most sense when you’re employed but struggling to make ends meet due to the delay between your expenses and your paycheck.

The best thing about paycheck advances is that they’re usually cheap (sometimes even free) since you’re just getting cash that would’ve eventually been yours anyway.

But there are some issues:

  • If your employer isn’t willing to give you an advance, there’s not much you can do to change their mind
  • They’re not a viable solution to consistent cash flow problems

If you like the idea but don’t think your boss will give you an advance, you can use a third-party app like Earnin to help you out, which can get you approved for an advance and funded within a day.

3. Personal (Bad Credit) Loans

Personal loans are flexible, unsecured (with no collateral), and relatively affordable options when you need cash for general expenses. While it can be difficult to qualify for one if your credit score is low, it’s still possible.

Personal loans are usually issued for amounts between $500 and $100,000, with interest from 3% to 36% APR, and have repayment periods of roughly two to five years.


It can take up to a couple of weeks to qualify for a personal loan and receive your cash, though it’s faster with online lenders than brick-and-mortar banks.

Here are some examples of online lenders that may be willing to work with borrowers who have lower credit scores:

  • OppLoans: “Focused on helping middle income, credit-challenged consumers build a better financial path.”
  • Upstart: Uses a unique artificial intelligence software to assess borrower risk that approves 27% more borrowers than traditional methods.

4. Payday Alternative Loans (PALs) from Credit Unions

Payday loans are such a problem that federal and state credit unions offer loans that are specifically designed to combat and replace them.

The National Credit Union Administration regulates PALs so that they fill the same need as payday loans without becoming predatory by placing restrictions on them, such as:

  • Loan amounts must be between $200 and $1,000
  • The maximum APR is 28% and the maximum application fee is $20
  • Loans must be repaid over one to six months, with no rollovers
  • Borrowers can’t receive more than three PALs within six months

To qualify for a PAL, you need to be a member of the credit union offering one for at least a month. Fortunately, they usually don’t have many other requirements other than a reasonable ability to repay your loan, so they won’t worry too much about your credit score.

5. Nonprofits and Charities

Some nonprofits and charities in your local community will help you out financially, especially if you’re struggling due to an emergency or a sudden loss of income.

These groups are primarily for those who need assistance affording necessary expenses, like food and clothing. So if you’re considering a payday loan because you need to find a way to feed yourself or clothe your family, reach out to your local nonprofits and charities first.

For better or worse, because each local group is probably run independently, they’ll all have unique application requirements and provide funding at their own unique speed.

6. Pawn Shop Loans

Pawn shop loans are only slightly less terrible than payday loans. While payday loan rates usually start at around 400% APR, pawn shop loans tend to start at 200% APR. So they’re still outrageous (and not recommended), but slightly less outrageous on average than payday loans.

You don’t need a credit score, a bank account, or even income to qualify for a pawnshop loan. To receive one, you just need to bring in something valuable as collateral.

The pawn shop will give you a cash loan based on a percentage of your collateral’s resale value, which you’ll have to pay off (plus interest and fees) in a month or two. If you can’t, they’ll sell your collateral to recoup their losses.

7. Side Hustles

Debt is the fastest way to get cash when you need it, but it’s not the most sustainable. Loans and credit cards will always catch up with you eventually.

If you have enough time, it might be more helpful to build a side hustle than take on additional debt. A side hustle is any form of additional work that you can use to supplement the income from your full-time job.

They don’t have to be extremely lucrative or scalable. If all you need is an extra $500 a month, there are plenty of options for you. Some great and accessible examples are:

  • Driving for Uber or Lyft
  • Walking dogs in your city
  • Babysitting for neighbors

8. Payment Plans

Last but not least, if you were considering a payday loan to pay off old debt, you can try to negotiate a payment plan instead. All you need to do is contact your creditors, explain your situation, and ask for what you want. 

Many lenders and businesses will consider adjusting your debt repayment terms if they think it’ll help them recover more of their money. They want to avoid having to deal with collecting from you or losing their money because you declare bankruptcy.

You can get an expert to help you with these negotiations or do it yourself, but it’s usually worth a shot either way. Even if your attempt doesn’t work, it’s a low-risk proposition, since the worst thing they can do is say no.

Read more: EPP Loans: All About Payday Loan Extended Payment Plans

Beware of High-interest Installment Loans

Whenever possible, you should look to reduce your interest rate, especially on installment loans, since your interest can compound so quickly.

Even a few percentage points can be valuable, so you should do everything you can to avoid payday loans (which have astronomically higher rates than other loan types). If you’re currently already trapped in a spiral of payday loans, Debt Hammer can help. Contact us today for a free consultation to reduce your payday loan debt as soon as possible.

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