Payday loans are good options when you are in need of urgent money. However, there are several downsides to consider. The interest is often too high and can trap you in a debt trap. In that case, you can consider payday alternative loans.
Are you worried about having a low credit score? Thankfully, there are established lenders who provide PAL funding to borrowers with bad credit scores. This helps you stay away from payday loans and enjoy a better offer.
It’s important to know the scheme in detail so that you are aware of both the pros and cons to make an informed decision. Let’s find them out.
What Is A Payday Alternative Loan?
A payday alternative loan, or PAL, is a short-term loan offered by federal credit unions. The amount varies from $200 – $2000. While having a good credit score helps, you can also get a loan with a bad score, in other ways, no credit check.
Compared to payday loans, this funding comes with more affordable interest rates and fees. Also, you won’t need to repay the full amount on the next payday. Though the amount is limited, it helps when you need quick cash, especially on the same day.
Similarities and Differences Between Payday Loans and PAL
Payday loans and payday alternative loans differ from each other on several grounds. Before choosing any of them, understand their differences.
Funding Amount
The loan amount is usually the same for both schemes. You can apply and get cash close to $1000 mostly, while it can be a bigger amount when taking a loan from some specific lenders. In general, there are not huge differences in the funding, unlike payday loans vs personal loans.
Speed of the Process
Both PALs and payday loans follow a quick process. You can get them through online applications without even visiting the lender’s physical location. Once you submit the necessary documents, you will get the money deposited to your account directly- usually on the same day.
Risk Factors
This is where the differences begin. Payday loans, though quick, are risky because of various scammers. There are many money lenders who promise to offer bigger amounts if you provide an upfront fee and then scam you. While you can stay safe by knowing the red flags of payday loans, PALs don’t have such risks. You will find many reputed lenders without taking third-party help.
Repaying Systems
While payday loans offer a fixed payment schedule, PALs are more flexible when it comes to repayment terms. You can repay in installments- the duration varies from a month to even a year. So, you will repay only a small amount each month, making it more affordable and easier.
In contrast, payday loans demand you to repay the money in the very next payday. This often becomes difficult and challenging, especially when you take a bigger amount. Some often fall into a debt cycle trap.
Money Use Conditions
When you receive funding from payday loans, you can use them for any legal purposes. This gives you complete freedom. However, there are some restrictions on payday alternative loans. Though you will get a full deposit to your account, you can only use half of the amount. The other half will remain in your account, and you can only use it after repaying the full loan.
Advantages of PAL?
Payday alternative loans offer many benefits over payday loans. Check the below discussion if you are not yet convinced:
Low Interest Rates
One big problem with payday loans is that they often come with a high interest. This puts pressure on the borrowers and some scammers, with their unclear policies, can trap you into debt traps. That’s not the case with PALs, though. Lenders mention clear interest rates on their website, and it’s often much less and more affordable. Usually it can be about 28%, while payday loans APR can be as high as 400%!
More Flexible Payment Terms
You are not bound to pay the loan amount on your next payday, unlike payday loans. You can repay the loan in several installments. This makes the repaying terms more flexible. The interest rate or the payment term won’t put a strain on you. This makes it a more affordable and better option.
No Credit Checks
A major challenge to get loans these days is often not having a good credit score. But you can get a payday alternative loan even with a credit check. This makes it more accessible for everyone. Whenever you need a loan, PALs funding makes an easy and quick choice.
Quick Cash
Payday alternative loans don’t take very long. You can apply for the loan, and it usually does not take more than a day to get approval. If you need quick cash, even on the same day, you can apply with a few simple documents and submit an application.
More Reliable Lenders
It’s more safe to take a loan from payday alternative loan lenders. Unlike payday loan providers, they are more reliable. You can get PAL loans from Federal Credit Unions, which are authorized. So there won’t be any confusing terms, and everything will be transparent.
How to Get Payday Alternative Loans for Bad Credit?
It’s quite a simple and straightforward process to get a loan from PAL lenders. Here are the steps you need to follow:
- Find a reliable and authorized lender
- You can use online banking systems or use a mobile application of the lender
- Find loan lending options, and click on Apply
- Follow their application process and provide the necessary information
- If your application is accepted, then you will receive the money within 24 hours.
What to Consider When Choosing A PAL Lender?
Look for affordability, transparency, and reliability to ensure a beneficial borrowing experience. Here are the key considerations:
- Compare lenders to find the lowest rates and minimal fees for an affordable repayment plan.
- Check repayment periods and flexibility to ensure manageable payments that fit your financial situation.
- Review income, employment, and membership criteria to confirm you qualify before applying.
- Research customer feedback and lender credibility to avoid scams or predatory practices.
- Choose a lender with a straightforward process and quick approval if you need funds urgently.
- You should also check the terms and policies properly to stay away from traps.
Final Words
Payday alternative loans are good options for quick cash. It’s quick, offers low interest, and more time to repay the money in multiple installments. You should be considerate when choosing the lender and take time to find a reliable option.
