Payday Alternative Loans

What Is A Payday Alternative Loan?

Suppose your car has broken down on the interstate highway, or you need quick cash to cover a medical emergency. Due to a bad credit score, it may be difficult for you to access a payday or a traditional bank loan. That's where payday alternative loans come in.

Credit unions, regulated by the National Credit Union Administration (NCUA), offer PALs. Unlike traditional banks, credit unions are not profit-making organizations. Its membership depends on your religion, workplace, or home area.

Credit union institutions mainly exist to take care of their members’ financial status instead of making a profit. Most of them offer low-interest loans to their active members after a soft check of credit score. The low-interest loans are known as payday alternative loans (PALs).

Payday alternative loans generally have lower interest rates than other payday loans. This makes it easier to clear the loan in a short time because the interest accumulates slowly.

Are Payday Alternative Loans Safe?

Yes, PALs are safe. This is because of the affordable interest rates charged. Compared to ordinary payday loans with a rate of 391%, payday alternative loans charge a paltry rate of 28%, which is only a tiny percentage of what banks charge. The low-interest rates greatly reduce borrowers’ financial burden, helping them establish a safe and healthy financial status.

What is more, payday alternative loans are safe because clients cannot borrow money more than three times every six months. Additionally, it is illegal to roll over a PAL for more cash. Credit unions strictly regulate payday alternative loans to prevent members from getting into a debt cycle. To achieve this, they don’t let you borrow another loan until you clear the existing PAL.

How to Apply for A Payday Alternative Loan?

To apply for a payday alternative loan, you need to:

• Find a credit union that offers this type of loan: The loan amounts depend on the state of residence. You can apply for a payday alternative loan with a credit union near you. Search on the internet to find a nearby union that offers PAL.
• Be an active credit union member for at least one month before application: Payday alternative loans aren’t just a way of getting quick cash online. This means you cannot just rush to a credit union and request some emergency funds. If you think you will need a PAL at some point, please join a credit union in your living area in advance.
• Visit the credit union offices: The office staff will guide you through filling out the application forms and any other procedures.

Besides, you need to know a few things before sending in your application. These are short-term loans that range between 1 to 6 months. Don't apply if you cannot repay within that time frame. On the bright side, the requirements for payday alternative loans are not very strict and most credit unions provide professional financial counseling to borrowers.

These unions offer PALs quick cash online. They will then guide you through the application process, which includes checking your information, clarifying the terms and conditions, and signing the agreement.

How Do Payday Alternative Loans Work for You?

For payday alternative loans, the credit unions do not consider your credit score as much as your income. Therefore, you can get your loan even with bad credit. The credit requirement for most borrowers is usually 500 on average.

The application process is quite simple compared to any other traditional loan. The lenders will check your income to make sure you’re able to pay back your loan. For this reason, you may be required to provide proof of income during the application process. You may be charged a membership fee as well, and this can be as low as $5.

PAL lenders also report your payments to the credit bureau. This means that if you make your payment on time, you can improve your credit scores.

Other advantages of PALs include:

• Faster approval - Your lender can disburse your cash as soon as the next day.
• Improved flexibility - The payment method is flexible.
• Negotiable repayment - Lenders can allow you to make changes to the initial loan repayment schedule.
• Transparent charges - No hidden or added fees.

The Proper Situation Where You Can Use Payday Alternative Loans

While PALs have more lenient terms compared to traditional payday loans, they’re still quite costly and shouldn’t be your first option when you are in need of quick cash. Here are some proper situations where you can use payday alternative loans.

1. When You Have Used Up Other Options

There are other methods to get cash with bad credit before you apply for PALs. These include:

• Personal loans
• Loans with a cosigner
• Credit cards

When you do not qualify for any of the above, you can now consider getting a payday alternative loan.

2. To Avoid Spiraling Debt Cycles

It’s easy to get caught up in debt cycles with traditional short-term loans since they have higher interest rates and are not regulated strictly. With PALs, you’re not allowed to take up another loan until you’ve fully paid off your first loan. By doing this, you can avoid the debt trap and keep your credit scores in good standing.

3. For Favorable Interest Rates

Most short-term loans do not offer interest rates as reasonable as those of PALs. You’ll pay an annual rate of about 28%, which is much lower than, for instance, a 300% annual rate offered by traditional payday loan lenders.

Conclusion

Payday alternative loans (PALs) enable you to get quick cash online despite having a bad credit score. It is a ‌loan that sits between a personal loan and a traditional payday loan. A PAL is safer compared to other ways of getting quick cash online. The 28% interest rate is pretty affordable compared to ordinary payday loans at 391%.

There are several requirements you must meet to get a PAL. What is important is that you should demonstrate your ability to repay the loan.