Payday loans drain over $4.1 billion in fees per year from borrowers in states where payday loans are legal, according to the Center For Responsible Lending.
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 in fees a year. Don’t get stuck in the payday loan debt trap.
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19 easy payday loan alternatives
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.
But borrowers have other options for short-term loans or financial assistance. Before you turn to a payday loan, first consider these alternatives.
1. Peer-to-Peer (P2P) Lending Apps
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+ |
| Upstart | 6.7% to 35.99% | $1,000 | $50,000 | 3 or 5 years | 620+ |
| 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+ |
| Happy Money | 5.99% to 24.99% | $5,000 | $40,000 | 2 to 5 years | 640+ |
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. Sign up for a cash advance app
The popularity of these apps (like Dave, Albert or Earnin) is soaring, particularly 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 in case you don’t already have a checking account.
3. Ask for a paycheck advance
Paycheck 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.
First, ask your employer if it’s possible to get paid early or whether the company participates in what’s known as an “earned wage access program.” These plans allow employees early access to the money they’ve already earned.
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.
4. Debt consolidation loan
If you’re overwhelmed with payments each month, a debt consolidation loan can be a good way to get your financial situation under control. Debt consolidation involves getting a new, bigger loan (preferably at a lower interest rate) and using the money from that loan to pay off your other loans. This can help you save on late fees and make on-time payments because you’ll have fewer payments to worry about each month. If you have good credit, you can also try consolidating with a balance transfer credit card. Here’s how.
5. Bad credit loans
Not everyone will have credit scores that are good enough to qualify for debt consolidation loans, but that doesn’t mean there are no loan options. Personal loans are flexible, unsecured (with no collateral), and relatively affordable options when you need cash for general expenses. While traditional banks may not be much of a help if your credit score is low, there are several lenders who offer options for borrowers with bad credit.
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.
READ MORE: Debt consolidation loans for bad credit borrowers
6. Payday Alternative Loans (PALs)
Payday loans are such a problem that federal 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.
READ MORE: Payday Alternative Loans
7. 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.
8. Debt settlement
This is more of a long-term solution, but if you can’t pay your credit card bills or other unsecured debts, it could be worth exploring.
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.
READ MORE: Debt settlement vs. debt consolidation
9. 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.
Some groups have even started specifically 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
10. 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, and 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.
Search to see whether your state offers any additional programs.
11. 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.
12. 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
13. Sell items you aren’t using
Maybe you have extra furniture, or old clothing or baby gear you no longer need. List these items on Facebook Marketplace. You’d be surprised what people are looking for, and you can get the money almost immediately. You can also list the items on sites like eBay, Mercari and Poshmark, but you’ll have to deal with shipping the items. Still, it can be worth that extra step if the items are small. If you have items in storage that you aren’t using, take the time to sort through everything and get rid of what you don’t need. This could also save a storage unit rental fee.
14. Borrow from friends or family members
Asking for financial help is always uncomfortable (there’s a reason it’s called personal finance) but if you’re truly struggling, your family won’t want to see you suffer. Don’t be afraid to ask for help. But be sure to discuss payment agreements and draw up a contract, then fulfill those obligations. You don’t want to ruin a friendship by defaulting on a loan.
15. Sell plasma
Plasma is the liquid portion of your blood, and 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)
The funds are usually added to a prepaid debit card, so the money should be available as soon as you finish the donation process.
16. Sign up for credit counseling
A nonprofit credit counseling agency will review your finances and make recommendations. If you agree to a Debt Management Plan, the credit counselor will contact your creditors to negotiate lower annual percentage rates. They will then help you set up a savings account and establish a payment plan. While credit counseling is free, there’s a monthly fee to administer Debt Management Plans. It runs from $25 to $75 per month.
READ MORE: Debt settlement vs. debt management
17. 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 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.
18. Borrow from your 401(k)
If you have money stashed away for retirement, many employers will let you borrow from that balance and repay the loan over time (you pay the interest to yourself), but there are a couple of drawbacks:
- If you lose or change your job, you may have to repay the entire loan in a lump sum or have to pay a hefty penalty
- You’ll be losing out on potentially bigger gains
- You’ll have to pay a quarterly fee
Still, it can be worth it to help yourself out of an immediate crisis, particularly if you don’t plan on changing jobs anytime soon.
19. Try to negotiate a payment plan
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.
Even if your attempt doesn’t work, it’s a low-risk proposition, since the worst thing they can do is say no.
What to do if you’re already in payday loan debt
If you’re already stuck in the debt cycle, you are;t alone. More than 90% of Americans regret their original payday loan.
You’re not alone if you already have an outstanding payday loan and you’re seeking additional funds. Over 80% of payday loan borrowers take out a second loan within a month.
But there are ways to escape. These include:
- Payday loan consolidation
- Debt settlement
- Credit counseling
- Extended payment plans (EPP loans)
- Bankruptcy
- 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 other options to help you escape the debt cycle.
Try more than one option if you need to, and once your finances are back on track, start a small emergency fund so that the next time you run a little short, you have a nest egg to fall back on.
FAQs
The Consumer Financial Protection Bureau says 80% of payday loans aren’t repaid back in two weeks.
The federal government won’t help you pay your payday loans. However, state governments offer various protections and interest rate caps. Check the laws in your state.
With a title loan, the borrower uses the vehicle as collateral. Title loans are commonly used by borrowers with poor credit or financial challenges and who need quick access to cash.
To obtain a title loan, the borrower must own a vehicle outright or have a significant amount of equity in the vehicle. The borrower then gives the vehicle title to the lender, who holds it until the loan has been repaid. The borrower is required to repay the loan, along with fees and interest, within a short period of time, often 30 days or less.
