PAL Loan
A PAL (Payday Alternative Loan) is a small-dollar loan offered by federal credit unions under National Credit Union Administration rules. APR is capped at 28%, application fees at $20. PAL I offers $200-$1,000 with 1-6 month terms and requires 1 month of credit union membership. PAL II offers up to $2,000 with 1-12 month terms and no waiting period.
PALs were created by the NCUA in 2010 as a regulated alternative to payday loans. The structure deliberately addresses what makes payday loans expensive: the rate cap eliminates the high-APR pricing, the longer term reduces rollover pressure, and the regulated fee cap prevents fee creep.
Why PALs are dramatically cheaper
A $1,000 payday loan rolled over twice costs about $300 in fees. A $1,000 PAL at 28% APR over 6 months costs about $90 in interest. Even on a single non-rolled payday loan, the PAL is usually cheaper for any borrowing window longer than 14 days.
Eligibility
To get a PAL, you need to be a member of a federal credit union that offers them. Most federal credit unions do, but not all. Membership criteria vary: some are based on geography (living in a certain county), employer, profession, or affiliation with a partner organization. Many credit unions have very loose membership criteria.
What PALs can’t do
PALs cap at $2,000 (PAL II) and $1,000 (PAL I). For amounts larger than that, you’d need a regular credit union personal loan, which has higher rates than the PAL but is still usually cheaper than online subprime alternatives.
You can have only one PAL outstanding at a time, and credit unions sometimes restrict access if you’ve taken several PALs in succession: the product is designed for occasional bridge credit, not as ongoing financial supplementation.