How to Find Better Alternatives to Payday Loans

When you’re faced with an emergency — a car repair, medical bill, or other unexpected expense — and you don’t have the cash to cover it, a payday loan may seem like your only choice. This is usually not the case; there are other options that are much less expensive than payday loans.

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

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

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

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

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

If you cannot find a local organization to cover your financial needs, there are other alternatives to payday loans which are safer and more affordable.

Think of ways to find money quickly: If your need is relatively low, you may not need to borrow the money. There are ways to make some quick cash by getting creative, such as selling spare electronics or unused gift cards, or taking a temporary side gig.

Apply for an alternative payday loan: Alternative payday loans allow you to 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, although local credit unions may offer similar products. You will need to become a member of the credit union before applying.

Download a cash advance application: Cash advance apps can help you cover an emergency expense by letting you borrow against 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, chances are you can use a buy now, pay later payment plan. These plans don’t require a credit check and split your purchase into equal, sometimes interest-free installments.

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 next day.

Payday loans are short-term loans, usually $500 or less, that are supposed to be paid off with your next paycheck. You can get a payday loan in person from an in-store lender or online, by providing proof of income, ID, and a bank account. Payday lenders don’t usually check your credit, which makes them accessible to more borrowers.

However, payday loans are among 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 an APR of 391% – well above the 36% cap that most financial experts agree is the highest APR a loan can have and still considered affordable.

Can create a cycle of indebtedness: Due to their high cost, payday loans can create a cycle of debt that is difficult to escape. For example, if you need $100 but only owe $115 two weeks later, chances are you don’t have the money to repay. You may need to extend the due date, which means additional fees. Do it enough times and you might owe more than you originally borrowed.

Do not build credit: Your payday loan payments are generally not reported to the three major credit bureaus, which means you cannot use these loans to build credit. Having a good credit score is important for accessing more affordable financing options in the future.