- PALs are offered by federal credit unions under NCUA rules.
- Interest is capped at 28% APR, plus an application fee of no more than $20.
- PAL II loans go up to $2,000 over 1–12 months, with no waiting period after joining.
What is a payday alternative loan?
A payday alternative loan (PAL) is a small-dollar loan that federal credit unions can offer under rules set by the National Credit Union Administration (NCUA). PALs were created to give members an affordable alternative to payday loans: the amounts are similar, but the price is far lower and repayment is spread over months instead of weeks.
PAL I vs. PAL II
| PAL I | PAL II | |
|---|---|---|
| Loan amount | $200 – $1,000 | Up to $2,000 |
| Repayment term | 1 – 6 months | 1 – 12 months |
| Membership required before borrowing | At least 1 month | None — you can apply as soon as you join |
| Maximum interest rate | 28% APR | 28% APR |
| Application fee | Up to $20 | Up to $20 |
| Rollovers | Not allowed | Not allowed |
Rules also limit how many PALs you can have: a credit union can make no more than three PALs to one borrower in a rolling six-month period, and you can only have one at a time. Not every credit union offers PALs, and each one sets its own approval criteria within these rules.
PAL vs. payday loan: the cost difference
| Payday loan | PAL | |
|---|---|---|
| Fee or interest | $60 for 2 weeks at $15 per $100 | About $19 in interest over 3 months at 28% APR (plus up to $20 application fee) |
| Repayment | $460 in one payment | About $140 a month for 3 months |
| If you cannot repay on time | Rollover fees can repeat | Rollovers not allowed; talk to the credit union |
PAL figure is an estimate for a 3-month amortizing loan; your credit union will give exact numbers.
How to get a PAL
- Find a federal credit union you can join. Membership is based on where you live, work, worship or study, or on joining an association. The NCUA's credit union locator helps you search.
- Ask whether it offers PALs, sometimes called "small-dollar loans" or "payday alternative loans".
- Open a membership account, usually with a small deposit.
- Apply with proof of income and ID. Many credit unions approve PALs quickly and deposit the money into your share account.
Paying a PAL on time can help build your credit history with the credit union, which can make larger, cheaper loans easier to get later.
Tried the free options first?If you still need a small short-term loan, you can send one request to our lender network. Compare the cost carefully.
See loan optionsFrequently asked questions
What is the maximum APR on a payday alternative loan?
Federal credit unions can charge up to 28% interest on PALs, plus an application fee of no more than $20 that reflects the actual cost of processing.
How much can I borrow with a PAL?
PAL I loans are $200 to $1,000 over 1 to 6 months. PAL II loans go up to $2,000 over 1 to 12 months.
Do I have to be a credit union member to get a PAL?
Yes. For PAL I you must have been a member for at least a month. PAL II has no minimum membership period.
Do all credit unions offer PALs?
No. Only federal credit unions can offer PALs under NCUA rules, and offering them is optional. Ask your credit union directly.