According to the Center For Responsible Lending, payday loans drain over $4.1 billion in annual fees from borrowers in states where payday loans are legal.
And that’s not counting title loans, which drain another $3.8 billion in fees per year from residents of 22 states. Between the two, that’s nearly $8 billion. Don’t get stuck in the payday loan debt trap. There are better alternatives.
Table of Contents
12 alternatives that are better than payday loans
Statistics show that when the next paycheck rolls around, 80% of payday loan borrowers have to roll over their loans or reborrow, leaving them trapped in a cycle of debt that may seem impossible to escape.
However, borrowers have other options for short-term loans or financial assistance.
Michael Schmied, lead financial consultant for Kredite Schweiz, recommends using personal loans, credit card cash advances and peer-to-peer lending platforms instead of payday loans.
“These platforms can offer competitive rates and allow for online applications, making them a convenient option,” Schmied advises.
Before you turn to a payday loan, here are 12 better options to consider.
1. Payday Alternative Loans (PALs)
Payday loans are such a problem that federal credit unions offer loans specifically designed to combat and replace them.
Payday Alternative loans are similar to payday loans in that there are minimal requirements and your credit score likely won’t matter. But you can borrow more money, the interest rates are capped and you don’t have to repay it in a single lump sum from your next paycheck.
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 $2,000
- 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.
READ MORE: Payday Alternative Loans
2. Credit card cash advance
These usually aren’t ideal because credit card companies immediately start charging interest as soon as you withdraw the cash advance, but typical credit card interest rates hover between 20% to 30% APR, while a payday lender will sometimes charge APRs of more than 600%. If you need cash right away, a cash advance can be a better alternative, particularly because you don’t have to repay it in full in two weeks.
READ MORE: How to pay off multiple payday loans
3. Sign up for a cash advance app
The popularity of these apps (like Dave, Albert or Earnin) is soaring, mainly because users don’t pay interest on the money they borrow. Instead, you pay a small monthly subscription fee. About 33% of Americans have signed up for one. They offer you small cash advances that are repaid on from your next paycheck but don’t charge interest — a big change from the incredibly high interest rates charged by payday lenders. Most don’t check your credit reports, so it won’t matter (much) if you have poor credit. Some, like Chime, also offer banking services if you don’t already have a checking account.
READ MORE: Best cash advance apps
4. Ask for a paycheck advance
Paycheck advances allow you to access the money 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.
Employers are starting to recognize that offering access to earned wages is a big help for workers. To that end, many are signing up for earned wage access platforms, which allow employees to get pay advances online, without an awkward conversation with HR or a supervisor. Check to see if your employer participates in one of these companies.
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
Earned wage access apps include PayActiv, Branch and DailyPay.
READ MORE: Fast and easy payday loan relief
5. Apply for emergency public assistance programs
There are a number of government-run programs at both the state and federal level that may be able to help. Major national programs include:
- ERA: The U.S. Department of the Treasury has made 10.8 million Emergency Rental Assistance (ERA) payments to households at risk of eviction while investing in projects to support long-term housing stability through Dec. 31, 2022, and the program is ongoing. Learn more about the program at treasury.gov.
- LIHEAP: The Low Income Home Energy Assistance Program will help you pay your heating or cooling bills or get emergency services during an energy crisis. Lifeline will help you pay for phone service. Learn more at usa.gov.
- SNAP: The Supplemental Nutrition Assistance Program provides nutrition benefits to supplement needy families’ food budgets. This can be especially helpful since 49% of Americans struggle to feed their families due to higher food prices. Learn more at usda.gov.
Some nonprofits, charities and food banks in your local community will also 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.
Some groups have even explicitly started targeting payday lenders. One church in Dallas bought a bank so that it could help borrowers in need bypass traditional payday loans. And in Memphis, which tops the list of cities with the worst payday lending problems, Forward Memphis partnered with banks and credit unions to offer an alternative to expensive payday loans.
Other groups include:
- GiveDirectly
- Modest Needs grants
- Food banks and pantries
- Tenant resource centers
Each group has different application requirements, so if you don’t qualify for one, don’t give up.
READ MORE: Need help now? How to get free money and other assistance
6. Personal loans
If your credit score is too low to qualify for a debt consolidation loan, that doesn’t mean a payday loan is your only option. There are several lenders who offer options for borrowers with bad credit. These are often called “bad credit loans,” and some lenders have no minimum credit score requirement at all.
Personal loans are usually issued for between $500 and $100,000, with interest from 3% to 36% APR, and have repayment periods ranging from two to five years.
| Lender | APR range** | Minimum loan amount | Maximum loan amount | Loan term | Minimum credit score* |
| Upstart | 6.7% to 35.99% | $1,000 | $50,000 | 3 or 5 years | 300 |
| Upgrade | 8.49%-35.99% | $1,000 | $50,000 | 2 to 7 years | 560 |
| SoFi | 6% to 36% | $5,000 | $100,000 | 2 to 7 years | 680 |
| Personalloans.com | 5.99% to 35.89% | $1,000 | $35,000 | 2 months to 8 years | 580 |
| Universal Credit | 11.69%-35.99% | $1,000 | $50,000 | 3, 5 or 7 years | 560 |
| Avant | 9.95% to 35.99% | $2,000 | $35,000 | 1 to 5 years | 580 |
| Happy Money | 5.99% to 24.99% | $5,000 | $40,000 | 2 to 5 years | 640+ |
*Estimated; you may be approved with a lower score. **Some loans also charge hefty origination fees; please review your loan terms carefully.
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.
READ MORE: Debt consolidation loans for bad credit borrowers
7. Peer-to-peer (P2P) lenders
Peer-to-peer lending is pretty much just like it sounds: Individuals offer to loan money to others and in return, they are paid interest.
Getting financing from an individual has three main benefits:
- Quick application and approval process
- 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:
| Lender | APR range | Minimum loan amount | Maximum loan amount | Terms | Credit score* |
| Peerform | 5.99% – 29.99% | $4,000 | $25,000 | 3 or 5 years | 600+ |
| LendingClub | 8.05% to 36% | $1,000 | $40,000 | 3 or 5 years | 600+ |
| BadCreditLoans | 5.99% to 35.99%. | $500 | $10,000 | 3 months to 6 years | No minimum |
| Prosper | 6.99% to 35.99% | $2,000 | $40,000 | 3 or 5 years | 640+ |
| Funding Circle | 5.99% to 16.49% | $25,000 | $500,000 | 6 months to 5 years | 660+ |
| Opploans | 5.99% to 35.99% | $500 | $4,000 | 6 months to 3 years | No minimum |
Recommended credit score; You may be approved with a lower score.
If you like one of the options offered, you’ll usually need to undergo an additional hard credit check, but then you can expect to receive your funding within a couple of weeks.
8. Debt settlement
This is more of a long-term solution, but if you’re struggling between paychecks because you’re making too many minimum payments each month, this could be a low-cost solution.
Debt settlement involves hiring a company (like DebtHammer) to contact your creditors and negotiate a settlement offer that is less than the total amount you owe. In exchange, you’ll pay a fee ranging from 15% to 27% of the total debt settled. It will initially hurt your credit score (because your debts will have to be charged off before creditors will be willing to consider a settlement). Still, it likely will be worth it because you can get out of debt faster, and you’ll end up repaying less than the total amount you currently owe. According to the American Association for Debt Resolution, the average debt settlement customer still saves a total of about 30% of their enrolled debt after fees.
READ MORE: Payday loan settlement
Note: The American Association for Debt Resolution was previously known as the American Fair Credit Council.
READ MORE: Debt settlement vs. debt consolidation
9. 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 not ideal, but can still be better than payday loans if you live in a state with no cap on payday loan interest rates.
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.
10. Side hustles
Taking on debt is the fastest way to get cash when needed, but it’s not the most sustainable. Loans and credit cards will always catch up with you eventually.
If you have enough time, building a side hustle will be more helpful than taking on additional debt. A side hustle is any form of additional work you can use to supplement the income from your full-time job.
They don’t have to be extremely lucrative or scalable. If you only need an extra $500 a month, you have plenty of options. Some great and accessible examples are:
- Driving for Uber or Lyft
- Walking dogs in your city
- Babysitting for neighbors
- Shopping for Instacart
- House-sitting (particularly if you’re currently sharing an apartment with roommates.)
Pro tip: Avoid selling for a multi-level marketing (MLM) company like Avon, Norwex, Mary Kayn Cosmetics, Rodan + Fields, Lularoe, etc. These may sound like profitable side hustles, but most require an initial cash investment that could make your situation worse, and you have to be a skilled salesperson to be able to make these programs profitable. According to the Federal Trade Commission, 99% of MLM businesses lose money.
11. Sell plasma
Plasma is the liquid portion of your blood; hospitals need it for life-saving medical treatments. Plasma donation centers will pay you for donating, including hefty bonuses of up to $1,000 for first-time donors. After that, compensation is usually around $50 to $75 per appointment, but how much money you make depends on a few factors:
- Where you live
- How much you weigh (the more a donor weighs, the more plasma can be collected)
Pro tip: The bonus usually involves three to four donations, paying from $150 to $250 per visit. The first appointment will be more time-consuming while you deal with paperwork, but after that, the average appointment takes about an hour. Pain is relatively minimal — it’s similar to a standard blood draw.
The funds are usually added to a prepaid debit card, so the money should be available as soon as you finish the donation process.
12. Use a home equity loan or line of credit
If you own a home and have equity, the interest rates will often be lower on a home equity loan than the vast majority of personal loans or credit cards. The average home equity loan or HELOC has interest rates below 10%. The payment will be in addition to your mortgage, and make sure that your budget will allow it. If you default on a home equity loan, you’re putting your home at risk.
What to do if you’re already in payday loan debt
You aren’t alone if you’re already stuck in the debt cycle. More than 90% of Americans regret their original payday loan and 80% of borrowers take out a second loan within a month.
But there are ways to escape. These include:
- Payday loan consolidation
- Credit counseling
- Extended payment plans (EPP loans)
- Bankruptcy
- Seek legal help
Stuck in payday debt?
DebtHammer may be able to help.
The bottom line
If you’re short on cash, payday loans may seem like a lifeline, but payday lenders aren’t doing you any favors. There are several better alternatives to help you escape the debt cycle, and the key is to find the ones that work for your own financial situation.
“Remember, the best choice depends on your individual circumstances,” Schmied says. “It’s important to compare options before making a decision.”
