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Credit union PALs: the 28% APR alternative to payday loans

Federal credit unions can lend up to $2,000 at no more than 28% APR, with a fee of no more than $20. Who qualifies, how to join and what to ask.

Bison Cash USA editorial teamUpdated October 17, 2026Fact-checked against 5 primary sources

The short version

At a glance

Key takeaways

  • Payday alternative loans (PALs) are small loans from federal credit unions, capped at 28% APR.1
  • PALs I range from $200 to $1,000 for one to six months. PALs II go up to $2,000 for up to 12 months, with no waiting period after you join.1
  • The application fee cannot exceed $20.2
  • Borrowing $500 for six months on a PAL costs about $42 in interest. A payday loan rolled over for the same time would cost about $975 in fees.3

The basics

What is a PAL?

A payday alternative loan is a small-dollar installment loan that federal credit unions can offer under rules set by the National Credit Union Administration. The loans must be fully paid down in equal installments, so each payment reduces what you owe.1

The maximum APR is 28%, which is 10 percentage points above the general 18% federal credit union ceiling.1 That compares with about 391% for a typical payday loan.3 It is higher than the 11.90% average bank rate on a 24-month personal loan in August 2026.4 The difference is size: many banks set personal loan minimums well above the $200 to $2,000 range PALs are built for.

Side by side

PALs I vs. PALs II

FeaturePALs IPALs II
Loan amount$200 to $1,000Up to $2,000
Term1 to 6 months1 to 12 months
Membership required firstAt least 1 monthNone
Maximum APR28%28%
Application feeUp to $20Up to $20
Loans at onceOneOne
Loans per 6 monthsUp to threeUp to three
RolloversNot allowedNot allowed

Sources: America’s Credit Unions; NCUA rule.12

The savings

What a $500 loan costs for six months

Cost to borrow $500 for about six months

Interest and fees, in dollars

Payday loan rolled over 13 times ($15 per $100)$975
Credit union PAL at 28% APR, plus $20 fee$62
Payday: 13 two-week cycles at $75 each.3 PAL: six equal monthly payments of about $90.27, totaling about $41.62 in interest, plus the maximum $20 application fee.2

How to get one

How to get a PAL

  1. 1

    Find a federal credit union you can join

    Membership is often based on where you live, work or worship, or on a family member. Many credit unions have broad eligibility.

  2. 2

    Ask which PAL type they offer

    Not every credit union offers PALs. PALs II let you borrow right after joining, while PALs I require at least one month of membership.1

  3. 3

    Apply with proof of income

    Credit unions must have underwriting guidelines, so expect to show pay stubs or bank deposits.

  4. 4

    Set up automatic payments

    Equal payments on your payday make it easier to stay on track and may build your credit history.

Questions to ask

Questions to ask before you sign

  • What is the APR, and what is the total amount I will repay?
  • Is there an application fee, and how much is it?
  • Do you report payments to the credit bureaus?
  • What happens if a payment is late?
  • Can I pay the loan off early without a penalty?
i

Military families: the Military Lending Act caps most consumer credit for active-duty service members at a 36% military APR.5

FAQ

Common questions

What is the maximum interest rate on a PAL?

Federal credit union payday alternative loans are capped at 28% APR.

Do I have to be a credit union member to get a PAL?

Yes, PALs are offered to members. PALs I require at least one month of membership, while PALs II can be made as soon as you join.

How many PALs can I have?

You can have only one PAL at a time and no more than three in any rolling six-month period.

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Sources

Sources for this page

Official and primary sources only. Last reviewed October 17, 2026.

  1. 1
    America's Credit UnionsNCUA rules
    Comparing PALs I and PALs II Loans
    americascreditunions.orgLoan limits, terms and 28% cap
  2. 2
    National Credit Union AdministrationFederal rule
    Payday Alternative Loans (Federal Register, 83 FR 25583)
    federalregister.govPALs I rules and $20 application fee cap
  3. 3
    Consumer Reports AdvocacyCFPB findings
    Summary of CFPB payday loan research
    consumerreports.orgFees, APR and rollover data
  4. 4
    Federal Reserve BoardOfficial statistics
    Consumer Credit G.19
    federalreserve.govReleased Oct 7, 2026 · August 2026 data
  5. 5
    Consumer Financial Protection BureauFederal law
    What is covered under the Military Lending Act?
    consumerfinance.gov36% MAPR cap