Alternatives to Predatory Lending

Credit Union Loans

Credit unions are like non-profit banks designed to help consumers that may be unable to obtain services at mainstream financial institutions. Many credit unions offer small, short-term loans to their members. Some credit unions also provide free financial counseling and a savings plan to help members get back on their feet. Many other credit unions offer very low interest rate loans (prime to 18% annual interest) with quick approval on an emergency basis. Unlike payday loans, these loans give borrowers a real chance to repay with longer payback periods and installment payments. Moreover, banking with a credit union can allow you to build a positive credit rating and save for the future. Find a credit union near you by simply entering your zip code at:

  • Contact a credit union near you to find out if you are eligible to join. Then inquire about their small loan products. We have a list here!

Payment Plan with Creditors

The best alternative to payday loans is for consumers to deal directly with their debt. Many creditors will negotiate partial payments if a payment plan is in place. Working out a payment plan with creditors can allow you to adjust billing to pay off bills over a longer period of time.

  • Find out if you can delay paying a non-interest bill such as a utility bill and make payment arrangements with the utility company.
  • Ask your creditors for more time to pay your bills. Find out what they will charge for this service – such as a late charge – and compare these rates with other options.

Advances from Employers

Some employers grant paycheck advances to employees. Because this is a true advance, and not a loan, there is no interest and the advance is therefore cheaper than a payday loan.

  • Ask your employer for an advance on your paycheck – they would rather see you financially secure and ready to work than struggling to get out from under payday loans.

Consumer Credit Counseling

There are various consumer credit counseling agencies throughout the country that can help you work out a debt repayment plan with creditors or develop a budget. These services are available at little or no cost. Beware agencies that claim to offer credit counseling but actually charge hidden fees and provide little assistance with your current creditors.

  • Contact a nationally accredited consumer counseling agency in your area by calling 1.800.388.2227 or visiting

Emergency Assistance Programs

Many faith-based groups and community organizations provide emergency assistance, either directly or through social services programs. There are both federal and state programs that will offer money to pay utility bills or other vital services.

  • Locate local resources through a church, department of social services, or by calling Virginia Information and Referral at 211 from any phone (8am to midnight) to see if you qualify for various types of financial assistance.

Overdraft Protection

Payday lenders claim their fees are lower than paying bounced check fees. A better alternative to getting a payday loan is to prevent bounced check fees in the first place. Most banks offer checking accounts with overdraft protection. For a small fee ($5) or no fee, banks will cover a check by moving money from a savings account.

Overdraft protection through a line of credit is also available, typically at 10 to 18% APR. NOTE: While traditional overdraft protection may be a good alternative to payday loans, fee-based bounce protection programs usually are not.

  • Find out if you have, or can get, overdraft protection on your checking account by calling your bank and asking about their relevant products.

Help From Friends and Family

Often, people are embarrassed or ashamed to ask for temporary financial assistance from friends or family. However, a true friend would rather see you survive in the present without ruining your financial future by getting trapped by payday lenders. Everyone gets in a bind occasionally and it’s OK to request help.

  • Ask to borrow money from a friend or relative.

Cash Advances on Credit Cards

Credit card cash advances, which are offered at about 30% APR, are much cheaper than getting a payday loan. Some credit card companies specialize in consumers with financial problems or poor credit histories. You should shop around for the best APR and not assume that you do not qualify for a credit card. Secured credit cards are another option. A secured credit card is tied to a savings account. The funds on the account ‘secure’ the amounts charged on the card. Once you have successfully used the secured card for a period of time, you can then qualify for a regular unsecured credit card. Keeping credit card accounts in good standing will allow you to build good credit.

  • Consider a cash advance on a credit card by contacting your credit card company and asking about their rates on cash advances and/or secured credit cards.

Small Consumer Loans

Small consumer finance companies offer small, short-term loans that cost up to 60% APR, usually in the range of 25-36% APR. These loans are also much cheaper than payday loans; you can borrow $1000 from a finance company for a year, and pay less than a $200 or $300 payday loan over the same period.

  • Consider a short-term loan from another financial institution or a loan repayable over several months.

Military Loans

Several companies offer loans ranging from $500 to $10,000 to active duty and retired military personnel. Payday loans are 10 to 13 times more expensive than these small consumer loans. These loans cost less than payday loans because they have much lower APR, ranging from 33% to 34.99%. Each military branch has staff dedicated to protecting and building the financial security of all of their personnel.

  • If you are active duty or retired military, contact Military OneSource at 1.800.342.9647 to find the installation nearest to you with a family service center or support center that can help with financial problems.