Financial emergencies are often best resolved with assistance from a credit union or community bank. They typically offer more affordable loans at better interest rates than payday lenders can provide.
However, not every credit union offers a PAL. Some may have rules against offering them and others require borrowers to join the credit union before being eligible for one.
Payday alternative loans (PALs)
Credit unions can provide PALs to their members as a way of helping them get through financial emergencies without the high APRs, balloon payments and rollover fees associated with traditional payday loans. PALs are an accessible solution for those in need of short-term funds and credit unions can leverage these relationships to offer other financial products and services to their members.
Loans of this nature (PALs) are relatively small unsecured loans that can be repaid over a period of one to six months. The maximum APR on these loans is 28%, and the application fee cannot exceed $20.
The National Credit Union Administration (NCUA) allows federal credit unions to offer Personal Auto Loans (PALs). To be approved, borrowers must be members of the credit union for at least one month and demonstrate their ability to repay the loan.
In 2019, NCUA Board authorized a second type of Payment Assistance Loan (PAL II), which permits credit unions to lend up to $2,000 with repayment terms ranging from one to twelve months. Unlike its predecessor, this PAL has no waiting period and is immediately available to applicants upon membership approval.
PAL II
Federal credit union members now have an affordable alternative to payday loans thanks to the National Credit Union Administration’s (NCUA) approval of a new PAL rule in late 2019.
Credit unions typically don’t perform credit checks like payday lenders do. Nonetheless, borrowers are required to submit pay stubs or bank statements as evidence of their income.
Furthermore, the maximum interest rate for a PAL II loan cannot exceed 28% – significantly lower than the annual percentage rate on traditional payday loans.
Credit union members can get PALs for terms ranging from one to six months, unlike payday loans which can be rolled over multiple times. This helps prevent debt accumulation that could result in higher fees and interest rates; it may also motivate you to make timely payments and boost your credit score.
PAL application requirements
Payday alternative loans (PALs) are short-term, small loans offered by some federal credit unions. According to the National Credit Union Administration, these loans must meet certain criteria in order to be approved.
Payday loans (PALs) can be an ideal solution for people who would otherwise become in debt from payday loans, which often have high interest rates and lengthy repayment periods. Furthermore, PALs do not report to the credit bureaus unless you default on your loan.
These loans often feature lower application fees than traditional payday loans, which can range from $10 to $30 per $100 borrowed. Furthermore, borrowers may have up to six months in which to repay their loans at a maximum annual percentage rate (APR) of just 28% – far lower than the average APR on payday loans.
However, NCUA has some strict rules about PALs that can make them challenging for some borrowers to obtain approval. Notably, each member must receive one PAL at a time and no more than three can be issued within any six-month rolling period.
PAL fees
Credit union payday loans can be an efficient option when you’re having difficulty making ends meet. They come with lower fees and interest rates than traditional payday loans, which may be prohibitively costly.
PAL fees cannot exceed $20 per loan and the maximum interest rate cannot exceed 28%. These costs cover processing and delivering loans to borrowers.
To apply for a Payment Assistance Loan (PAL), you must be an active member of the credit union for at least one month. You can apply in person at one of their branches or over the phone.
People with poor credit or other derogatory financial history may not qualify for a Personal Appliance Loan (PAL). However, if you can afford to repay the loan within 12 months, PALs could be more suitable than payday loans in certain situations.
