Payday Alternative Loans: How Credit Union PALs Work
| PAL I | $200–$1,000; 1–6 months; 1-month membership |
|---|---|
| PAL II | Up to $2,000; 1–12 months; no waiting period in the rule |
| Application fee cap | $20 |
| Rate cap | 28% (NCUA) |
| Limits | Max 3 PALs in 6 months; 1 at a time; no rollovers |
| Offered by | Participating federal credit unions only |
What is a payday alternative loan?
A payday alternative loan is a specific product defined by the National Credit Union Administration (NCUA), the federal regulator for federal credit unions. The rules, found at 12 CFR 701.21(c)(7)(iii) and (iv), let participating federal credit unions offer small-dollar loans to members with set limits on amount, term, fees and rate. Not every credit union offers PALs; it's optional.
PAL I vs. PAL II at a glance
| Rule | PAL I | PAL II |
|---|---|---|
| Loan amount | $200–$1,000 | Up to $2,000 |
| Term | 1–6 months | 1–12 months |
| Membership before borrowing | At least 1 month | No waiting period in the rule |
| Application fee | Up to $20 | Up to $20 |
| Maximum rate | 1,000 basis points above the NCUA ceiling (28% today) | Same |
| Number of loans | No more than 3 PALs in any rolling 6 months, and only 1 at a time | Same as PAL I |
| Rollovers | Not allowed | Same as PAL I |
The NCUA has extended the general federal credit union rate ceiling at 18% through September 10, 2027, which puts the PAL maximum at 28%. A credit union may also not charge overdraft or NSF fees in connection with a PAL II.
What PAL payments can look like
Because PALs are repaid in installments, the cost depends on the rate and term the credit union sets, up to the 28% cap. At the cap, a $500 PAL over 6 months is about $90.27 a month, about $541.62 in total, plus any application fee up to $20. A $2,000 PAL II over 12 months at 28% is about $193.01 a month. Your credit union discloses the exact APR and payments before you sign.
Worked example: matching the loan to the bill
Say you need $1,500 for a car repair. A PAL I tops out at $1,000, so it wouldn't cover the full amount; a PAL II could, if your credit union offers one. At the 28% cap, $1,500 over 12 months is about $144.76 a month, about $1,737.11 in total. If you request the same $1,500 through our network, a lender would show you its own APR, monthly payment and total of payments before you sign, so you can compare the two side by side. Try the personal loan calculator to test different terms.
How to get a PAL: joining a credit union
- Find a federal credit union that offers PALs. Ask directly; not all do.
- Check eligibility. Credit unions serve a defined field of membership, such as an employer, community, school or association.
- Open an account. Many credit unions let you join online with a small deposit.
- Meet the timing rule. PAL I requires at least one month of membership; PAL II doesn't set a waiting period in the rule, but the credit union may have its own requirements.
- Apply and wait for underwriting. Credit unions review income and ability to repay; timing varies.
If you're already a member, ask whether a PAL is available. If you need money before you can join and qualify, a faster route is below.
What credit unions look at and what to bring
Each credit union sets its own underwriting standards for PALs, within the NCUA rule. Most review the same basics:
- Membership status: how long you've been a member (PAL I needs at least one month) and whether your account is in good standing.
- Income: pay stubs, a benefits letter or bank statements showing regular deposits.
- Ability to repay: whether the monthly installment fits your budget.
- Other PALs: the rule allows only one PAL at a time and no more than three in a rolling six months, so an open PAL can rule out a new one.
Bring a government-issued ID, your Social Security number, proof of address, proof of income and your account details. If your credit union doesn't offer PALs or you can't meet its timing, you can check your options through our form in about 3 minutes.
PALs vs. payday and installment loans through our network
| Credit union PAL | Loan through our network | |
|---|---|---|
| Who offers it | Participating federal credit unions | Lenders in our network that serve your state |
| Membership needed | Yes (1 month for PAL I) | No |
| Amounts | $200–$2,000 | $100–$5,000, by state and lender |
| How to apply | Through your credit union | One online form, about 3 minutes |
| Funding | Varies by credit union | Often the next business day after approval |
| Credit | Credit union's own review | All credit types; many lenders focus on income |
Both are real options. If you're not yet a member, or the bill is due before you could qualify, a loan through our network is a fast way to get it handled.
See if you qualify — it takes about 3 minutes. Start your free request. There is no obligation to accept an offer.
Who PALs suit best
- People who are already credit union members and can wait for the credit union's review.
- Borrowers who need $200 to $2,000 and want installment payments.
- Those who can meet the one-month membership rule for PAL I.
Need money sooner, more than $2,000, or a lender that focuses on income rather than membership? See installment loans, payday loans by state, or the broader payday loan alternatives guide. Military members also have protections under the Military Lending Act.
Common mistakes with PALs
- Assuming every credit union has them. PALs are optional, so call or check before you join for that reason alone.
- Applying for a PAL I too soon. The one-month membership rule applies to PAL I.
- Asking for more than the cap. PAL I is $200 to $1,000; only PAL II goes up to $2,000.
- Forgetting the one-at-a-time rule. You can't have two PALs open together.
State rules still matter for other loans
PAL rules are federal and the same in every state. Payday, installment and title loans from other lenders follow state law, which differs widely. See payday loan rules by state or personal loan rates by state for where you live.
Get a fast answer
Our free form takes about 3 minutes and reaches lenders in our network that serve your state, for requests from $100 to $5,000. Many lenders decide within minutes, and if you're approved and sign, funds are often deposited by the next business day. You'll see the amount, fees, APR and total to repay before you sign. Zebra Finance is a matching service, not a lender or credit union, and approval isn't guaranteed.
See if you qualify — it takes about 3 minutes. Start your free request. There is no obligation to accept an offer.
Frequently asked questions
What is a payday alternative loan?
It's a small-dollar loan some federal credit unions offer under NCUA rules. PAL I loans are $200 to $1,000 for one to six months; PAL II loans are up to $2,000 for one to 12 months. Fees are capped at $20 and the rate at 28%.
How do I get a payday alternative loan?
Join a federal credit union that offers PALs, then apply through it. PAL I requires at least one month of membership. PAL II has no waiting period in the federal rule, though the credit union can set its own requirements.
What is the interest rate on a PAL?
Federal rules allow up to 1,000 basis points above the NCUA's general ceiling. With the ceiling at 18% through September 10, 2027, PALs can't exceed 28%. The credit union discloses the exact APR before you sign.
How many PALs can I have?
Only one at a time, and no more than three PALs (I or II combined) in any rolling six-month period. Rollovers aren't allowed, though a credit union may extend the term within the maximum without extra fees.
Do all credit unions offer payday alternative loans?
No. PALs are optional, and only federal credit unions operate under these NCUA rules. Ask your credit union whether it offers PAL I, PAL II or both.
What if I can't wait to join a credit union?
Lenders in our network don't require membership. One free 3-minute form reaches lenders offering $100 to $5,000 depending on your state, with funds often deposited by the next business day if approved.
Is a PAL a payday loan?
No. A PAL is an installment loan from a federal credit union, repaid over one to 12 months under NCUA rules. A payday loan is typically repaid in one payment on your next payday and is regulated by state law.
Can I get a payday alternative loan with bad credit?
Possibly. The NCUA rule doesn't set a minimum credit score; each federal credit union sets its own underwriting, usually focused on membership, income and ability to repay. If you aren't a member or need money sooner, you can also apply through our form, where all credit types are considered and many lenders focus on income.
Sources
- 12 CFR 701.21 — Loans to members (PAL I and PAL II), via Cornell LII
- NCUA — Permissible Loan Interest Rate Ceiling Extended