What Is a Payday Alternative Loan (PAL)?
A Payday Alternative Loan (PAL) is a small-dollar loan created by the National Credit Union Administration (NCUA) specifically so federal credit unions could offer a lower-cost option than a traditional payday loan. Instead of the flat fees that push payday loan APRs into the triple digits, PALs cap the interest rate itself — making them one of the cheapest short-term borrowing options available, if you qualify.
💡 The catch: PALs are only offered by federal credit unions, and you generally have to be a member — sometimes for a minimum period — before you can apply. If that doesn't fit your timeline, our installment lender network below is a faster-to-access alternative.
PAL I vs. PAL II — The Two NCUA Programs
- PAL I: $200 to $1,000, repaid over 1 to 6 months. Most credit unions require at least one month of membership before you can apply.
- PAL II: Up to $2,000, repaid over 1 to 12 months. No required waiting period, so newer members can apply immediately.
Both types cap the interest rate at 28% APR, plus an application fee that can't exceed $20 — though combined, the effective APR (calculated under Truth in Lending Act methodology) can still run somewhat higher than the 28% rate alone, especially on smaller loan amounts over short terms.
PAL vs. a Traditional Payday Loan
A standard payday loan is typically due in full on your next paycheck and, as we cover in our payday loans guide, carries an average effective APR around 391% industry-wide. A PAL spreads repayment over months instead of weeks and caps the rate at 28% — a dramatically lower cost for a comparable emergency-cash need, which is exactly why NCUA created the program.
If You're Not a Credit Union Member
PALs aren't available everywhere, and not every credit union offers both PAL I and PAL II. If you need funds faster than a new membership application allows, or your credit union doesn't participate, an installment loan through our lender network is a comparable alternative — longer repayment terms than a payday loan, with APRs in our network's standard 5.99%–35.99% range depending on your credit profile.
Frequently Asked Questions
What is a Payday Alternative Loan (PAL)?
A PAL is a small-dollar loan offered only by federal credit unions under NCUA rules, designed as a lower-cost alternative to a traditional payday loan. Rates are capped at 28% plus a small application fee.
How much can I borrow with a PAL?
PAL I offers $200 to $1,000 over 1 to 6 months. PAL II offers up to $2,000 over 1 to 12 months and has no required waiting period for new members.
Do I need to be a credit union member to get a PAL?
Yes. PALs are only available through federal credit unions, and PAL I typically requires at least one month of membership first. If you're not already a member or need funds faster, an installment loan through our lender network may be a quicker alternative.
Ready to see your options? Compare installment offers from our full lender network in under 2 minutes.
Example: a $2,000 loan at a 20.99% APR over a 12-month term would carry an estimated monthly payment of $186.43. Actual payments vary by lender and depend on your approved rate and term.