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Payday alternative loan (PAL): what it means

A payday alternative loan (PAL) is a small loan that federal credit unions can offer their members instead of a payday loan, which costs much more. According to the NCUA, the federal rule limits the amount and the term, which is short; the application fee may only cover the real cost of processing it, and there is a cap on how many you can have in a period.

In Spanish it is

Préstamo alternativo (PAL)

Also written as: PAL · PALs · PALs I · PALs II

The full explanation

It is paid off in full in installments and cannot be rolled over. For one type of PAL, you must be a member for some time before applying. Some lenders that are not credit unions use the name, so read the fine print.

An example

Raúl is short on money to fix his car. Instead of a payday loan, he applies for a PAL at his federal credit union, where he has been a member for months, and pays it back in installments.

You will see it in…

  • Your federal credit union's list of loans
  • The loan disclosures, with the APR and the application fee
  • Ads that use the name “payday alternative loan”

Words that go with it

You will rarely see this word alone. These are the ones that show up with it on the same papers.

More guides that use “payday alternative loan (PAL)”

More words on this topic: Money

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Official sources

We sum up what these official sources say, in plain words. We add no rules they do not state; when a rule changes, the definition and its date change.

  1. 1. NCUA (MyCreditUnion.gov) · Payday Alternative Loans · in English · Verified on October 17, 2026
  2. 2. Legal Information Institute (Cornell Law School) · 12 CFR §701.21, Loans to members and lines of credit to members · in English · Verified on October 17, 2026