If you’re about to take a payday loan, there’s a cheaper version with a federal price cap on it, and you’ve probably never been offered one. Federal credit unions can lend you up to $2,000 at no more than 28% APR, with a $20 fee ceiling and no rollovers.
Most of them just don’t.
The loan nobody advertises
The product is called a payday alternative loan, or PAL. The NCUA, the agency that regulates federal credit unions, wrote it into its lending rule years ago. The rule lets a federal credit union charge 10 percentage points over its normal loan ceiling. In February the NCUA Board kept that ceiling at 18% through September 10, 2027. That puts the PAL cap at 28%.
The rest of the rule reads like someone wrote down every payday trick and banned it. The loan must be fully amortized, so each payment cuts the balance. No rollovers. The application fee “in no case exceeds $20.” No more than three PALs in six months, one at a time. The bigger version, PALs II, goes to $2,000 over up to 12 months, and unlike the original it carries no one-month membership wait.
We counted who actually makes them
We pulled NCUA’s call report data for June 30, 2026, the filings every credit union submits each quarter. Of 2,649 federal credit unions, 455 made at least one PAL in the first half of the year. That’s about 17%.
Together they made 168,180 PALs worth $178 million, about $1,060 apiece. The dollar-weighted average rate on PALs still outstanding was about 22.9%. Ten credit unions made nearly half of all of them.
So the cheap option exists, and most federal credit unions aren’t making it.
What it saves you
The CFPB says a common payday fee is $15 per $100 borrowed, “almost 400 percent” APR on a two-week loan. Borrow $500 and that’s $75 every two weeks. If payday comes and you can only cover the fee, you pay another $75 and still owe the $500. Do that for three months and you’ve paid $450 to rent $500.
The same $500 as a PAL at the full 28%, paid off over three months, runs about $175 a month and roughly $24 in total interest. Add the maximum $20 fee and you’re at $44.
That’s $44 against $450. Not close.
Do this now
Call the credit unions near you, or where you work, before you need the money. Ask one question: “Do you make payday alternative loans, PAL I or PAL II?” If the answer is yes, ask what it takes to join and how fast they fund.
Join now if there’s a wait. PAL I requires one month of membership, and an emergency won’t give you a month.
If the answer is no, ask for the rate on their smallest personal loan anyway. Then run the payment through our loan calculator and compare it to anything else you’re offered. Our bad-credit loan guide covers what else is out there, and the best personal loans page compares bigger amounts.
If a lender quotes a fee instead of an APR, convert it. That’s how a 400% loan sounds like $15.
The detail
PAL rules apply to federal credit unions only. State-chartered credit unions follow their state’s rules and don’t report PALs on this line of the call report, so our count covers federal charters. Our figures come from the NCUA’s June 2026 quarterly files (FS220H, accounts 031C, 031D, 397A and 522A), matched to charter type in the FOICU file. Rates are reported per credit union; the weighted average uses outstanding PAL balances.
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Sources
- 12 CFR 701.21, Loans to members and lines of credit to members, paragraphs (c)(7)(iii) and (iv) (eCFR)
- NCUA Board Extends Loan Interest Rate Ceiling (NCUA, February 6, 2026)
- Credit Union and Corporate Call Report Data, quarterly data files, June 2026 cycle (NCUA)
- What are the costs and fees for a payday loan? (Consumer Financial Protection Bureau)