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9 Payday Loan Alternatives For Bad Credit

You might be tempted to get a payday loan alternative if you urgently need money or to pay essential living expenses.

Many lenders will not even verify your credit score to be eligible for these loans. These loans are not recommended due to their high fees. They can have an annual percentage rate (APRs) of up to 400%. It should be used only as a last resort.

To keep more of your hard-earned money, consider one of the nine online payday loan options below.

1. Get a Payday Loan Alternative

Federal credit unions may offer payday alternative loans. These loans are designed to be a cheaper alternative to payday loans. This option allows you to borrow as much as $2,000 and can be repaid in one to twelve months. This is a far better rate than the typical payday loan interest rate of 28%.

Here is an example of the maximum percentage allowed for payday loans in each state. This was based on a $100 loan that lasted 14 days.

2. Credit Unions: Borrow from them

Credit unions, unlike traditional banks, are member-owned and not-for-profit. Credit unions may offer personal loans or other loans at lower rates. Credit unions have less strict eligibility requirements than conventional banks, so you may borrow money even if your credit is not great.

This option is similar to an alternative payday loan.

3. Apply for a Bad Credit Loan

According to the FICO credit scoring model, a bad credit loan may be available to you if your credit score falls within the acceptable credit score range (580-669).

Lenders that offer bad credit loans can approve applicants with credit scores below 580. If the lender allows, you may qualify for a loan with a co-borrower or cosigner.

Lenders will consider your credit score in addition to your income. They may also consider your debt/income (DTI).

Lenders usually offer a maximum interest rate of around the mid-30s, although you won’t get the highest rate for a good credit score. This rate is much lower than the payday loan, even though it is very high.

Prequalify with multiple lenders if you can. This will give you an idea of the interest rate and terms before you apply. When you submit the formal application, be prepared to provide personal information such as income, social security number (SSN), and birthdate.

4. Forge a lending circle

Consider forming a lender’s circle to help you pay for unexpected expenses in the future. A lender circle is a group of people who set aside a specific amount each month and pool it together.

The lending agreement may allow one person to borrow the entire amount in one month while another member can borrow it later.

Online lending circles can be joined or created with family members and friends. Online lending clubs may report member payments to the credit bureaus. This could improve your credit score.

5. Borrow from Family and Friends

You can also ask your family for a family loan to help you avoid paying high-interest rates and fees on payday loans. You don’t need to complete a formal application to obtain the cash you need.

After the friend or family member agrees, you can create a loan agreement that should specify the repayment terms and interest rate. Important note: Pay the loan on time to keep a good relationship with your family member.

6. Payment Plans to Help You with Your Bills

Ask your provider if they can arrange a payment plan if you are having trouble paying your bills. This will allow you to avoid paying the entire account at once. To help you through tricky times, some lenders might offer a deferment or forbearance program.

This option will likely result in interest and fees. However, if you can avoid taking out a payday loan, it might be worth the additional interest and costs.

7. Find Other Ways to Make Money

You might be able to increase your income and avoid a payday loan. While it is not easy to make more money, there are many opportunities online and offline. Online options include writing freelance, answering surveys, and testing new apps and websites. You can also drive for Uber or DoorDash, sell used items at a garage sale, and do a side job.

8. Responsible use of a credit card

A credit card responsible usage is another way to avoid paying high-interest rates and fees for a payday loan. You should only use your credit card for purchases that you can repay by the due date. You can avoid late fees, interest charges, and damage to credit scores by paying your entire balance on or before the due date.

You may also be eligible for a credit card with a 0% APR if your credit score is 700 or higher. This card offers a 21-month interest-free promotion. Interest can be avoided as long as the balance is paid in full before the promotional period ends. After the promotional period ends, interest charges will be accrued on any unpaid balance until it is fully repaid.

9. Apply for Financial Assistance Programs

You may be eligible for financial assistance programs depending on your income. You may qualify for rental assistance or help with food expenses. These programs can be found at your local chamber of commerce or library.

Bottom line: Payday Loan Alternative

You can avoid the high-interest payday loans and their skyrocketing fees by choosing another financing option. Compare all alternative options for payday loans and decide which one suits your needs best. You are likely to be eligible for the most economical choice.


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Jason Rathman
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