Payday alternative loan.
In plain English
A payday alternative loan (PAL) is a small-dollar loan offered by many federal credit unions as a regulated, lower-cost stand-in for a payday loan. The National Credit Union Administration (NCUA), the federal regulator for credit unions, caps the interest rate and limits the application fee, so the cost is far below a typical payday loan's triple-digit APR. You usually need to be a credit union member, and the loan is repaid in installments over a few months rather than in one lump sum. This installment structure makes it easier to repay without rolling the debt over.
01Why it matters
If you need a few hundred dollars fast, a PAL can cost a fraction of a payday loan, saving you from a debt cycle while you build a relationship with a credit union.
02The math, step by step
Instead of a $300 payday loan at roughly 400 percent APR, you borrow $300 through a credit union PAL. Under NCUA rules the rate is capped at 28 percent plus an application fee limited to $20, repaid over several months. Your total cost is a small fraction of the payday loan's.
03What this is NOT
A payday loan is a high-cost lump-sum loan from a private lender. A payday alternative loan is a regulated, rate-capped installment loan from a federal credit union you belong to. To use one, join a federal credit union and ask whether it offers PALs.
04Receipts
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