How to Find Better Alternatives to Payday Loans

Local and regional resources can help you weather an emergency — and avoid the risks of payday loans.
Jun 7, 2022

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When you're facing an emergency — a car repair, medical bill or other unexpected expense — and you don’t have the money to cover it, a payday loan might seem like your only choice. It's usually not; there are other options that are far less expensive than payday loans.

Discover more affordable alternatives and learn more about the risks of payday loans.

Local alternatives to payday loans

Many communities have charities, nonprofits and other organizations that can help cover an emergency expense so you won’t need to take out a payday loan.

We've found local and regional resources that can help, whether through assistance programs or small loans. Choose your state below to find options near you.

About these resources

NerdWallet has vetted these organizations to ensure they provide assistance with expenses such as rent, transportation, utilities and other emergencies. Some offer advice and education to help you make sound financial decisions even after the immediate crisis has passed.

Not only do these organizations offer alternatives to payday loans, but they also help avert a cycle of debt that can trap you for years.

More alternatives to payday loans

If you can’t find a local organization to cover your financial need, there are other alternatives to payday loans that are safer and more affordable.

Brainstorm ways to find quick cash: If your need is relatively small, you may not have to borrow money. There are ways to make fast money by getting creative, such as selling spare electronics or unused gift cards, or taking on a temporary side gig.

Apply for a payday alternative loan: Payday alternative loans let you borrow small amounts of money at a lower cost and with a longer repayment term than a payday loan. These loans are offered at federal credit unions, though local credit unions may have similar products. You’ll need to become a member of the credit union before applying.

Download a cash advance app: Cash advance apps can help you cover an emergency expense by letting you borrow from your next paycheck before you receive it. Some apps charge a small fee for using the service.

See if you can “buy now, pay later”: If you need to purchase an essential item from a major retailer, there’s a good chance you can use a buy now, pay later payment plan. These plans don’t require a hard credit check and split up your purchase into equal installments, sometimes with no interest.

Consider an emergency personal loan: An unsecured personal loan from an online lender can cover an emergency expense, and some lenders accept applicants with bad credit (FICO score of 629 or lower). As long as you provide all the necessary documents, you can usually receive funds the day you apply or the following day.

How are payday loans harmful?

Payday loans are short-term loans, usually for $500 or less, that are meant to be repaid by your next paycheck. You can get a payday loan in person at a storefront lender or online, by providing proof of income, identification and a bank account. Payday lenders don’t typically check your credit, making them accessible to more borrowers.

However, payday loans are some of the riskiest loans you can get because they:

Charge high fees: The cost of borrowing varies by payday lender, but a typical fee structure is $15 for every $100 borrowed. That’s a 391% APR — well above the 36% cap most financial experts agree is the highest annual percentage rate a loan can have and still be considered affordable.

May create a cycle of debt: Because of their high cost, payday loans can create a cycle of debt that’s hard to escape. For example, if you need $100 but owe $115 only two weeks later, there’s a good chance you won’t have the money to repay. You may need to extend the due date, which means another fee. Do this enough times, and you can end up owing more than you originally borrowed.

Do not build credit: Payments toward your payday loan are not typically reported to the three major credit bureaus, meaning you can’t use these loans to build credit. Having a good credit score is important for accessing more affordable financing options in the future.

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