CLEARBORROW · PUBLISHED NOVEMBER 12, 2026
Payday alternative loans (PALs): rules and how to get one
A payday alternative loan is a small loan from a federal credit union under NCUA rules. PAL I is $200–$1,000 for 1–6 months after at least one month of membership; PAL II is up to $2,000 for 1–12 months with no waiting period. Both cap APR at 28% and the application fee at $20, and neither can be rolled over. Our example: $500 over six months at the 28% cap costs about $42 in interest.
On this page
PAL I and PAL II rules
| PAL I | PAL II | |
|---|---|---|
| Amount | $200–$1,000 | Up to $2,000 |
| Term | 1–6 months | 1–12 months |
| Membership before applying | At least one month | None required |
| Maximum APR | 28% | 28% |
| Application fee | Up to $20 | Up to $20 |
| Rollovers | Not allowed | Not allowed |
Source: NCUA’s summary of PAL I and PAL II requirements (NCUA ↗). A credit union may offer only one PAL to a member at a time. Each credit union sets its own approval criteria within these limits.
What a PAL costs
| Our example at the 28% cap | Monthly payment | Interest paid |
|---|---|---|
| $500 over 6 months | $90.27 | $41.62 |
| $1,000 over 12 months | $96.51 | $158.07 |
| $2,000 over 12 months (PAL II) | $193.01 | $316.14 |
Our arithmetic, fully amortized, plus an application fee of up to $20. For comparison, a two-week payday loan with a $15-per-$100 fee costs $75 on $500 — every two weeks it is renewed (CFPB ↗).
Who can get one
Only federal credit unions make PALs, and not every one offers them. You must be a member; for PAL I you must have been a member for at least a month. Membership depends on the credit union’s field — for example where you live or work, or an association you can join.
The FTC lists PALs among the options that are much less expensive than payday or car title loans (FTC ↗).
How to find a PAL
- Check whether your current bank is a credit union, or look for federal credit unions you are eligible to join.
- Call and ask directly: “Do you offer payday alternative loans, PAL I or PAL II?” Some credit unions use their own product name.
- Ask what they check (income, account history, credit), how fast funds arrive and the exact application fee.
- If you need money before PAL I eligibility, ask about PAL II, which has no waiting period.
Limits to know
- Amounts are small and approval is not automatic.
- Funding is not always same-day; ask before you rely on it.
- State-chartered credit unions are not bound by the PAL rules; their small loans may have different terms.
Questions
Is a PAL a no-credit-check loan?
NCUA does not set a minimum credit score. Credit unions decide their own criteria and may look at income or your account history instead of or as well as credit.
Can I use a PAL to pay off a payday loan?
Credit unions may let you use a PAL to replace a high-cost loan. See how to get out of payday debt.
Does a PAL build credit?
It can if the credit union reports to the credit bureaus. Ask which bureaus it reports to.
Sources and limits
- NCUA: PALs I and PALs II requirements ↗
- FTC: payday and car title loans, and less expensive options ↗
- CFPB: costs and fees for a payday loan ↗
Sources checked November 12, 2026. This is general information, not legal, tax or benefits advice; rules differ by state. Worked examples are our own arithmetic, not offers. How we use sources.