What Is a Payday Alternative Loan?
If you’re in a tight financial situation and looking for a short-term solution to get through a tough period, an alternative loan might be the answer. With payday alternative loans, you can usually borrow up to $1,000 in just a few short hours. Nonetheless, there are still several things to consider before taking out a payday loan.
Payday loan alternatives are a type of short-term loan borrowers typically take out to cover unexpected costs like medical bills or everyday expenses such as rent, utilities, car repairs, etc. They are offered by federal credit unions as an affordable alternative to an expensive payday loan. Similar loans can also be secured through online lenders and traditional banks. Pal loans must be repaid in full after one to six months depending on your loan term. They are also provided one at a time to borrowers and they cannot receive more than three PALs within a six-month period.
Payday alternative loans are regulated by the National Credit Union Administration, and in their newer version, PAL II borrowers can take out up to $2,000 with a longer repayment period.
Payday Alternative Loan vs. Payday Loan: What’s the Difference?
If you’re in desperate need of money to make ends meet, a pal loan may be a good solution for you. They are not the same as payday loans, so let’s highlight the main differences.
-A payday alternative loan is a type of short-term, unsecured loan that has a maximum amount of $1,000 that you can take out. Many banks, credit unions, and even some online lenders offer it.
-A payday loan is also a type of short-term loan but can be longer than a pal loan. It is also unsecured but with a maximum of $2,500. These loans are offered by many traditional banks and lenders.
How to Qualify for a Payday Alternative Loan?
In order to be eligible to qualify for a payday alternative loan, you must first look at your credit score. These loans are perceived as high risk by lenders and looking into your credit score will give them an idea of your creditworthiness. Both payday loans and their alternatives are taken out to cover unexpected expenses and are typically paid back once you get your paycheck.
Other requirements will include having proof of a steady income, so you are able to prove you’re capable of paying back your lender. It’s also important for you to prove that you don’t have any outstanding debt from other creditors.
If you can meet all of these requirements and want to borrow money from a payday alternative lender, your next step should be to find a lender that’s the right fit for you. Some of them can ask you to provide additional documentation, while others may not require anything more than an email address and your name. Once you are confident with your lender choice, all you need to do is fill out an application.
If you decide this loan is the right fit for you, be sure to browse around for a bit so you know you are getting the best payday loan alternative possible.
Like with any other loan, the lenders here can be a bit untrustworthy, so be sure to read the fine print carefully before signing any documents. Don’t get discouraged by this, because many of them offer really good low-cost alternatives to payday loans.
Are Payday Alternative Loans Safer Than Payday Loans?
When you are in a need of money fast to cover some expenses before your salary arrives you may be thinking these loans are perfect for you. But there are still a few things to consider before deciding on anything. First, think about the time frame you have to secure money. If you have a bit of time and don’t need money instantly, getting a more traditional loan could be a better option that comes with a longer repayment period and better interest rates.
They also come with more flexibility. Second, ask yourself if the alternative loan is a good fit for your personal financial situation. If you are unable to wait a bit to get funding from a different kind of loan, a payday alternative loan may be your best option. These loans are usually available to you in just a few hours.
Both payday loans and payday alternative loans don’t have that favorable interest rates but by choosing pal you can be sure there will be no hidden fees that can often come up with payday loans. Payday loans can sometimes get you in a situation of predatory lending and trap you in debt so be very cautious if they are the ones you want to take out. So, in conclusion, pal loans are generally a safer option to choose.
Alternatives to Payday Alternative Loans
There are even some alternatives to a payday alternative loan that can help you get the short-term financial help you need. One of the more popular options is getting a credit card loan. Funds secured this way can also be used to cover unexpected expenses like rent or car repairs. Another good option to take into consideration is a personal loan from a bank or credit union, which typically has lower interest rates and longer terms than any payday loan.
There are also many online lenders that offer other short-term loans without needing to go through a bank or credit union and the money can be used for several purposes. Depending on a lender and a loan type you choose, will also depend the amount of money you will be able to take out.
If you have a good credit history and aren’t likely to need the money again soon, a more traditional loan or some of the options we gave you above may be a better fit for you. On the other hand, if you don’t have that good credit scores, an alternative loan may be a better choice.
Final Thoughts
In today’s world, we understand that it can be difficult to come up with ways to make ends meet. On the bright side, there are many options available for people who are struggling and need a little help getting back on their feet. While we cannot tell you which option can be best for you, we gave you an in-depth explanation of what is a payday alternative loan and how to get one.
In general, payday alternative loans are very simple to qualify for and have better interest rates than payday loans. Nonetheless, before making any decision, we suggest you talk to your financial advisor, so you get needed help in determining what loan type fits best your personal situation.
