Credit unions are not-for-profit and owned by their members. Many were started to serve working people, and a lot of them still take that seriously. That doesn’t mean every credit union will approve everyone. But it does mean a “no” from a big bank tells you very little about what a credit union might do.
Payday Alternative Loans (PALs)
Federal credit unions can offer small loans designed as an alternative to payday and title loans. The National Credit Union Administration sets the rules. There are two kinds:
- PAL I: $200 to $1,000, repaid over 1 to 6 months. You need to be a member for at least a month first.
- PAL II: up to $2,000, repaid over 1 to 12 months. You can apply as soon as you join.
- Both: the APR is capped at 28%, the application fee can’t be more than $20, and rollovers aren’t allowed.
Each credit union decides whether to offer PALs, and many state-chartered credit unions offer similar loans. Some look mainly at your income instead of pulling your credit.
A 28% cap is a different world from a loan that renews at triple digits.
How to ask for one
- Find a credit union you can joinMembership often comes through where you live, where you work, or a family member who already belongs.
- Open a basic accountUsually it’s a small deposit. Setting up direct deposit can help.
- Ask for a “Payday Alternative Loan” by nameFront-line staff don’t always mention it unless you ask.
- Bring proof of incomePay stubs or bank statements. If you have your title loan’s payoff amount, bring that too.
Be realistic about the limits
A PAL tops out at $2,000. If your title loan balance is bigger than that, a PAL may only cover part of it. Some online lenders use the “PAL” name, too, so make sure you’re dealing with an actual credit union. And if the credit union can’t help with the whole balance, ask about other products, like a share-secured loan if you have some savings.
If the credit union isn’t enough
There are other doors: community lenders (CDFIs), and payoff or buyback arrangements like the ones ReDrive offers. You can also combine options, for example a smaller credit union loan alongside a plan for the rest.
Quick answers
What is a Payday Alternative Loan?
A small loan from a federal credit union designed as an alternative to payday and title loans. The APR is capped at 28%, the application fee at $20, and rollovers aren’t allowed.
Do I have to be a member first?
For a PAL I, you need at least one month of membership. For a PAL II, you can apply as soon as you join.
Credit union said no? We may still have options.
Every situation is different. Tell us a little about your loan and your car, and we’ll walk you through the options you may have with ReDrive. No cost, no obligation, no pressure.
Explore options with ReDrive →Or call us: (817) 382-2093 · ReDrive Solutions, Plano, TX
This article is general information, not financial or legal advice. Programs, rates, and eligibility vary by lender and change over time. Always confirm the full terms in writing before you sign anything.