Payday loans are short-term, high-cost loans typically in amounts of $500 or less. As the name suggests, payday loans are intended to help borrowers cover their expenses until their next payday. However, many people end up renewing or rolling over their loans, leading to fees which can trap them in a cycle of debt.
Due to their high costs and short repayment schedules, payday loans generally aren’t recommended. Payday loan alternatives include personal loans, credit counseling, and borrowing money from friends and family. Here’s what to know about payday loans and other available options.
How do payday loans work?
Payday loans are low-amount, high-fee loans that are available in some states. Payday loans are meant to be repaid quickly, usually within two to four weeks. But many borrowers struggle to repay payday loans on time, incurring extra fees. A study from the Consumer Financial Protection Bureau (CFPB) found that four out of five payday loans are rolled over or reborrowed.
Learn More: How Do Payday Loans Work?
Important: Most states require that lenders offer no-cost extended payment plans. This is different from rolling over the amount you owe into a new payday loan, which can be an expensive and dangerous way to extend debt repayment.
Most payday loan lenders don’t run a credit check, which can make approval easy, especially if you have bad credit. They usually want to see that you’re employed or have a source of income, and you’ll need a bank account. If approved for a payday loan, you’ll provide a means for the lender to collect payment when it’s due, such as postdating a check for the amount borrowed plus fees. The lender would then deposit that on the due date if you don’t repay the loan sooner.
If your loan is due and you can’t afford to pay, contact the lender to ask about your options. All states but Michigan require payday loan lenders to offer no-cost extended repayment plans. Keep in mind that this is different from rolling over the loan amount which will involve additional fees. If you don’t live in Michigan and need more time to pay, choose a no-cost extended repayment plan instead of a rollover.
How to get a payday loan
The application process for a payday loan is relatively straightforward. Typically, you only need a photo ID, a bank account, and proof of income (such as a pay stub or bank statement). You also have to be 18 or older to get a payday loan.
If approved for a payday loan, you may receive funds immediately in cash, check, via a prepaid debit card, or as a direct bank deposit. It’s essential to carefully review the loan terms, including the repayment schedule, interest rate, fees, and any penalties or consequences for late payments.
Depending on your repayment agreement, the lender may collect funds on the due date through one of the following methods:
- Cash a postdated check you provided when the loan was issued
- Withdraw funds automatically from your bank account
- Accept payment in-store or online
How much do payday loans cost?
Payday loans are significantly more expensive than traditional loans or credit cards. Payday lenders generally charge a percentage or dollar amount for each $100 you borrow. Fees of $10 to $30 per $100 borrowed are common.
For example, a two-week payday loan with a $15 fee for every $100 you borrow translates to an APR of almost 400%, according to the CFPB. For context, the average interest rate on a credit card was 21.59% in February 2024, and the average interest rate on a 24-month personal loan was 12.49%, according to the Federal Reserve.
Let’s look at what a payday loan might cost in real life.
Payday loan: $500
Fees: $50 ($10 per $100 borrowed)
Total owed: $550
APR (over 2 weeks): 261%
If the due date is two weeks later, that means you need to come up with $550 (or more, depending on fees) in two weeks. If you can’t repay the full amount, the lender may offer a rollover or renewal, which may result in additional fees and keep you in debt longer.
Alternatives to payday loans
Before getting a payday loan, it’s important to consider more affordable alternatives.
Personal loans
Personal loans are preferable to payday loans as they have lower costs and longer repayment periods. Instead of receiving a lump sum you must pay back in a couple of weeks, you can typically repay a personal loan over one or several years.
Advertiser DisclosureOverview
Lightstream is one of three Credible partner lenders to offer loan amounts up to $100,000, which makes it ideal for financing large expenses like home improvements or weddings. Funds are available as soon as the same day you apply, and you'll have up to 12 years to repay certain types of loans, including home improvement loans, RV loans, and boat loans. There are no origination fees, and rates are low — Lightstream's lowest APR beats SoFi's advertised lowest APR by 1 percentage point. But you'll need good credit to qualify.
Unlike most lenders, Lightstream does not let you prequalify on its site. Nor does it provide a contact phone number next to its customer service hours on its website.
Repayment terms
2 - 12 years, depending on loan purpose
Eligibility
Available in all states except RI and VT
Time to get funds
As soon as the next business day
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Read full reviewOverview
Upstart has one of the lowest available APRs of Credible partner lenders and of all non-partners we reviewed, making it a good choice for well-qualified applicants. However, it's also is one of few lenders that doesn't have a minimum credit score requirement (if you apply on the lender's website), which makes it an option if you have bad credit or no credit history. Upstart may charge an origination fee as high as 12%, but good-credit borrowers may not be charged one at all.
Trustpilot gives Upstart 4.9 stars, which is the highest of all lenders we reviewed.
Time to get funds
As soon as 1 to 3 business days
Loan uses
Pay off credit cards, consolidate debt, relocate, make a large purchase, and other purposes
Read full reviewOverview
Discover Personal Loans offers low APRs, repayment terms up to seven years, no origination fees, nationwide availability, and doesn't require your Social Security number to prequalify on its site. You'll need to have an annual income of at least $40,000, and a FICO score 660 or higher, to be eligible. If your credit score is fair or poor, you'll need to go elsewhere, as Discover doesn't allow cosigners.
Funds are available as soon as the next business day after loan approval.
Eligibility
Available in all 50 states
Time to get funds
Funds can be sent as soon as the next business day after acceptance
Loan uses
Auto repair, credit card refinancing, debt consolidation, home remodel or repair, major purchase, medical expenses, taxes, vacation, and wedding
Read full reviewOverview
Upgrade has a suite of features that make it a very attractive lender: competitive interest rates, discounts for direct pay and autopay, as soon as same-day funding, up to seven-year repayment terms, and nationwide availability. Plus, loans are available to fair-credit borrowers, and you don't need to input your Social Security number to prequalify on the website. Upgrade even offers secured personal loans, which is not common among lenders.
However, Upgrade does charge an origination fee of 1.85% to 9.99%. You must have a FICO score of at least 600 and a minimum income of $25,000 annually to qualify.
Loan amount
$1,000 to $50,000 ($3,005 minimum in GA; $6,600 minimum in MA)
Loan uses
Credit card refinancing, debt consolidation, home improvement, major purchase, other
Read full reviewOverview
LendingClub is a solid lender for good credit borrowers and some fair credit borrowers that apply directly on its website. It's easy to prequalify with LendingClub, especially if you're uncomfortable providing your Social Security number, as the company doesn't require it at the prequalification stage. (You will need to provide it if you move forward with a full application.)
While prequalification is not a guarantee that you'll be approved for a loan, LendingClub does a better job than most other Credible partner lenders at approving applicants that have successfully prequalified. In other words, you're less likely to have your application declined once you apply (if you've already prequalified). LendingClub may charge an origination fee between 3% and 8%.
Eligibility
Available in all 50 states
Loan uses
Debt consolidation, paying off credit cards
Read full reviewOverview
SoFi stands out for offering no-fee personal loans with competitive rates, high loan amounts, long loan terms, discounts for autopay and direct pay, and funding as soon as the same day. Plus, SoFi prioritizes convenience for existing and potential customers with features like live chat and an easy prequalification process that doesn't require your Social Security number.
The main catch is that you need to qualify for a loan with SoFi, which can be hard to do if you don't have good credit. You also won't be able to apply with a cosigner, since SoFi doesn't accept cosigners; nor does it offer secured personal loans.
Fees
Option to pay an origination fee (up to 6%) in exchange for a lower rate
Time to get funds
Typically within a few days, given approval and bank account verification, but sometimes within the same day
Loan uses
Solely for personal, family, or household uses
Read full reviewOverview
Best Egg is a solid lender for a wide range of borrowers and, notably, scored second for personal loan satisfaction in J.D. Power's Consumer Lending Study. It offers competitive rates, reasonable loan terms and amounts, and personal loans for fair credit. You'll need a FICO score of at least 600 to qualify, but the lower your score, the higher your APR may be. The APR includes the interest rate and origination fees, which range from 0.99% to 8.99% with Best Egg.
Note that if you successfully prequalify with Best Egg, you may be more likely to be approved for the loan relative to other lenders you prequalify with. Based on Credible data, borrowers who chose to apply for a loan with Best Egg were more than twice as likely to be approved (relative to most other Credible partners).
Fees
Origination fee, late fee, unsuccessful payment fee, check processing fee
Eligibility
Available in all states except DC, IA, VT, and WV
Time to get funds
As soon as 1 to 3 business days after successful verification
Loan uses
Credit card refinancing, debt consolidation, home improvement, and other purposes
Read full reviewOverview
Avant personal loans are a good choice for borrowers with bad credit looking for small- to moderate-sized personal loans. Loans are available up to $35,000 and you could get the money as soon as the next business day after approval. Plus, Avant is more likely than some lenders to approve the applications of borrowers who've prequalified with Avant. However, the lender charges an origination fee up to 9.99%, and its top-range interest rates are among the highest of the lenders we reviewed.
Fees
Origination fee, late fee, dishonored payment fee
Eligibility
Available in all states except HI, IA, MA, ME, NY, VT, and WV
Time to get funds
As soon as the next business day (if approved by 4:30 p.m. CT on a weekday)
Loan uses
Debt consolidation, emergency expense, life event, home improvement, and other purposes
Repayment terms
1 to 5 years (2 to 5 years through Credible)
Read full reviewOverview
It’s worth considering a personal loan through Splash if you have good credit (ideally, a FICO score above 700). The platform offers loans from a wide range of lenders, and next-day funding is available. Plus, Splash has a live chat feature so you can get real-time answers without having to wait on hold or for an email. Loans are available up to $100,000 if you apply via Splash’s website.
Rates are competitive, but borrowers with excellent credit may find lower APRs elsewhere. If you need a repayment term longer than five years, you’ll need to look elsewhere as well.
Loan amount
$5,000 - $100,000 (up to $35,000 on Credible)
Eligibility
Available in all states except VT. OH and NM net disbursed amount must be greater than $5,000. MA must be greater than $6,000
Time to get funds
Same day available, typically 1-3 days
Loan uses
Debt consolidation, home improvement, medical expenses, major purchases
Read full reviewOverview
Universal Credit is one of a handful of lenders that offers personal loans for bad credit. If your FICO credit score is at least 560, you may be eligible for a Universal Credit personal loan. It offers loan amounts up to $50,000, repayment terms up to seven years, and discounts for direct pay and autopay. Funds are available as soon as the next business day after loan approval.
Note that rates and fees can be relatively high — you may pay an origination fee from 5.25% to 9.99%, and APRs start at 11.69%. If you get a loan with a high interest rate, consider refinancing your personal loan at a lower rate once you've improved your credit score.
Eligibility
A U.S. citizen or permanent resident; not available in DC, IA, SC, WV
Time to get funds
As soon as 1 business day after acceptance
Loan uses
Debt consolidation, pay off credit cards, home improvements, unexpected expenses, home and auto repairs, weddings, and other major purchases
Read full reviewOverview
Happy Money has been in operation since 2009 (formerly known as Payoff). It's an option for fair-credit borrowers (plus those with better credit), and notably has a relatively low top-end APR. In other words, you could qualify for a lower rate with Happy Money with fair credit, relative to other lenders that offer fair-credit loans. The company does charge an origination fee on some loans, up to 5%, but that's not as high as some other lenders' origination fees.
You should be prepared to wait a few days to get your money, as funding can take three to five days once approved. And loans aren't available in Massachusetts or Nevada. Happy Money has an A+ rating with the BBB and is ideal for debt consolidation and credit card consolidation loans.
Eligibility
Available in all states except MA, MS, NV, and OH
Time to get funds
As soon as 2 - 5 business days after verification
Loan uses
Debt consolidation and credit card consolidation only
Read full reviewOverview
BHG Money stands out for offering the largest loan amounts — up to $200,000 — of any Credible partner lenders. Simply put, if you need an unsecured personal loan over $100,000, there are very few places to look, but BHG is one. You'll have up to 10 years to repay the loan, but you'll need an annual income of at least $100,000 to qualify and a FICO score that's 660 or higher. However, if you have a cosigner that meets these requirements, BHG will consider your application.
Loan amounts start at $20,000, so look elsewhere for small loans. And BHG charges a modest origination fee between 2% and 4%, depending on your financial profile. Loan funds are available within three to 14 days of loan approval. Note that you can't prequalify with BHG.
Fees
Origination fees, late fees
Eligibility
Available in all states except Maryland and Illinois
Loan uses
Debt consolidation, baby (adoption), engagement ring financing, moving (relocation), business, home improvement, special occasion, cosmetic procedures, major purchase, taxes, credit card refinancing, medical expenses, vacation, wedding, other
Read full reviewFees
Origination Fee, $15 Late Fee, $25 NSF Fee
Eligibility
Available in all states except CO, CT, ME, NV, NH, TN, VT, WV, WY, and all U.S. Territories
Time to get funds
Funds typically deposited into your account in 1 business day13
Loan uses
Debt consolidation, credit card refinancing
Read full reviewOverview
OneMain Financial has multiple options for bad-credit personal loans. There is no minimum credit score required (if you apply directly with OneMain), which means you could get a loan with bad credit (FICO below 580). Plus, cosigners are allowed — a cosigner is someone (ideally, with good credit) who promises to repay the loan if you can't, which can make it easier to qualify or lower your rate. And, secured personal loans are available. You secure a loan with collateral, which may also help you qualify or lower your rate.
Rates are higher than competitors and OneMain charges origination fees as either a flat fee up to $500, or a percentage from 1% to 10% (depending on your state of residence). Note that even if you prequalify for a personal loan with OneMain, getting approved isn't a given.
Fees
Origination fee, unsuccessful payment fee, late fee
Eligibility
Must have photo I.D. issued by U.S. federal, state or local government
Time to get funds
As soon as 1 to 2 days after acceptance
Loan use
All except business, and education
Read full reviewPayday alternative loans (PALs)
Payday alternative loans (PALs) are available at credit unions. They are designed for people who need money fast and may struggle to qualify for a traditional personal loan. The APR on a payday alternative loan can be no more than 28%, which includes finance charges. Note that that's a lot better than the APRs on many payday loans (200% plus). Loans may be available up to $1,000 with terms up to 6 months.
Credit Counseling
A credit counselor can help you create a budget, provide free educational materials, and potentially negotiate with creditors on your behalf to reduce your debt through a debt management plan. You can find a nonprofit credit counseling agency through the National Foundation for Credit Counseling.
Borrow money from friends or family
Ask a friend or family member if they’d be willing to cover you until your next payday, but determine a clear repayment schedule you’re both comfortable with. For example, ask if they want the full amount back at once or if they’re willing to accept smaller payments over time. To preserve your relationship, make sure you can fulfill the payment terms you agree to.
Contact your creditors
Ask your creditors about repayment options before getting a payday loan. For example, if you’re considering a payday loan because you need to pay a credit card bill, reach out to the card issuer first. The company may be able to extend your payment due date or provide other support.
Are payday loans bad?
Payday loans are generally considered bad financial products. While payday loans can seem like an easy solution when you’re running low on cash, they come with significant risks.
The risks and criticisms of payday loans include:
- High fees: Payday loans cost more than traditional loan products, such as personal loans. Payday loan fees can vary significantly by state. For example, the average $500 payday loan in Florida has an APR of 281%, while the average payday loan APR in Idaho is 652%, according to a 2014 Pew study.
- Short repayment schedules: Payday loans are short-term loans that typically need to be repaid within two to four weeks. This short turnaround makes it challenging for many borrowers to repay their loans on time, often leading to additional fees and debt.
Learn More: Are Payday Loans Safe?
FAQ
How much can you get from a payday loan?
Payday loan amounts vary depending on your state’s laws and the lender. A common payday loan amount is $500. Just keep in mind you’ll need to repay both the original loan amount plus fees, which are typically at least 10% of the amount you borrow.
What happens if you can’t repay a payday loan?
If you can’t repay a payday loan, the lender may charge additional fees or interest and ultimately sell your account to a collection agency. The collection agency may then take legal action against you to recover the funds, such as a lawsuit, wage garnishment, or property lien. You’ll also see your credit score drop if the collection agency reports your account to the credit bureaus.
Why are payday loans so expensive?
Payday loans are so expensive because they’re meant for borrowers with low credit scores. To compensate for the added risk, payday lenders charge high fees over a short period of time. It’s best to pursue other types of financing before taking out a payday loan.
Can you get a payday loan with bad credit?
Getting a payday loan is possible even if you have bad credit. This is because payday lenders primarily look at your income instead of your credit score when determining your eligibility for a loan. But you may also be able to get a personal loan with bad credit, which is a better option if it’s available to you.
Meet the expert:
Credible Staff
Credible Staff. The goal of the Credible editorial writers and staff is to help our readers get up to speed on issues surrounding student loans, mortgage, and personal finance, so you can make informed decisions. We’re here to help you stay on top of the latest news, trends, concepts, and changes in policy and regulations.