North Carolina doesn’t allow payday loans, so if you’re looking for quick cash, you’ll need to explore other options.

There’s no real set definition of what a payday loan is, but in practice, they’re short-term loans with expensive fees and financing terms that can quickly trap people in a cycle of debt. 

Since payday loans aren’t legal in North Carolina — and they’re so expensive — we’ve rounded up two alternatives to payday loans in the state. Keep reading to see if one of them may be right for your financial situation.

• Earnin: Good for early access to your paycheck
• OneMain Financial: Good for looking beyond credit scores 

Earnin: Good for early access to your paycheck

Why you may want to consider Earnin: If you need a little bit of money to tide you over until your next paycheck, Earnin may be able to help. The company offers advances of up to $100 per day or up to $750 per pay period through its app.

Earnin doesn’t charge any interest or fees, but it does encourage you to leave a tip that you think is fair. You’ll pay back the amount you borrowed directly from your bank account on payday — though you’ll want to be sure you have enough funds to cover the payment, to avoid costly fees.

The app is available for both Android and Apple iOS users. Here are some more details about Earnin.

• Eligibility — Not all workers will be eligible to use Earnin. You need to have a “consistent” pay schedule with at least $320 earned every pay period. 
• Potentially fast funding — If you sign up for the app’s “Lightning Speed” feature, Earnin says you should receive your money the same day you’re approved for a fee. But your bank also has to be on board to offer this service. Otherwise, you’ll typically receive your money in one to two business days.
• Overdraft alerts — Earnin’s “Balance Shield Alerts” feature sends an alert when your bank balance drops below a certain amount that you choose. You can also enable “Balance Shield Cash Outs” to automatically send a $100 advance to your checking account if the balance drops below $100. 
• Borrowing from the future — Keep in mind that borrowing from your future paychecks could lead to a cycle of borrowing. Once you’re out of your emergency situation, evaluate and maybe get some help with your budget and see if there are any areas to tweak.

Read our Earnin app review to learn more.

OneMain Financial: Good for looking beyond credit scores

Why you may want to consider OneMain Financial: Even if you’ve had some bumps in your credit journey, OneMain Financial may still consider you for a personal loan. Credit scores are just one piece of the puzzle, according to OneMain’s website. The lender also considers income, expenses, collateral (if needed), credit history and ability to repay. In North Carolina, OneMain offers personal loans ranging from $1,500 to $11,000. (The lender may offer different terms through Credit Karma.)

• Co-applicants allowed — If you don’t think you’ll qualify on your own or want to try for a lower interest rate or larger loan amount, you can add another person to your loan application. Just remember that adding a co-applicant doesn’t guarantee approval.
• APRs and origination fee — OneMain’s starting APR is higher than what you’ll find with some other personal loan lenders, and its overall range is also high. But if you have good credit, you may want to look elsewhere. OneMain also charges a loan origination fee (either a flat amount or a percentage, depending on your state).
• No prepayment penalty — OneMain offers loan terms from 24 to 60 months. Keep in mind that the longer the repayment schedule, the more interest you’ll pay. But OneMain won’t tack on penalty fees if you want to repay your loan early.

Read OneMain Financial personal loan reviews to learn more.

How we chose payday loan alternatives in North Carolina

To create this list, we looked for lenders that are licensed to work in North Carolina that position themselves as alternatives to payday lenders or say they may lend to people with bad credit. When choosing lenders, we focused on factors such as how quickly loans are issued, loan amounts, fees, interest, prequalification applications, loan terms and lender transparency. 

If you need a small loan, you could also consider a payday alternative loan, which is a small, short-term loan offered by certain federal credit unions. The fee to process your application is limited to $20, and the APR is capped. You may also want to check the APR of any existing credit cards to see if it’s a more affordable option than taking out a loan.

*Approval Odds are not a guarantee of approval. Credit Karma determines Approval Odds by comparing your credit profile to other Credit Karma members who were approved for the personal loan, or whether you meet certain criteria determined by the lender. Of course, there’s no such thing as a sure thing, but knowing your Approval Odds may help you narrow down your choices. For example, you may not be approved because you don’t meet the lender’s “ability to pay standard” after they verify your income and employment; or, you already have the maximum number of accounts with that specific lender.

Payday loans can be a source of fast cash, but you’ll pay a high price to get that money in hand. A payday alternative loan could be a lower-cost option.

Payday alternative loans typically have much lower fees and annual percentage rates than traditional payday loans. This lower cost may help you avoid a seemingly endless cycle of debt.

Payday alternative loans are offered by some federal credit unions. There are two types of payday alternative loans — one that we’ll refer to as a traditional PAL and another known as a PAL II, which the National Credit Union Administration approved in late 2019. Let’s review what you should know about both types of payday alternative loans.

• What is a payday alternative loan?
• Payday alternative loans vs. payday loans
• How to apply for a payday alternative loan
• What other borrowing options should I consider?

What is a payday alternative loan?

A payday alternative loan is a short-term small loan offered by some federal credit unions. These loans must fulfill certain requirements, according to the National Credit Union Administration, which regulates federal credit unions in the U.S.

Federal credit unions can offer two different types of payday alternative loans. Here are some rules for traditional PALs.

• The interest rate can’t be more than 28%.
• Credit unions can’t charge a higher application fee than necessary to cover the cost of processing an application (and no more than $20).
• Borrowers are limited to loan-repayment terms of one to six months.
• Loan amounts must be within $200 to $1,000.
• Borrowers must be credit union members for at least one month.

The newer PAL II loans have some of the same rules, but there are a few differences.

• The interest rate, for the time being, also can’t be more than 28%.
• The maximum application fee is also limited to the cost of processing (no more than $20).
• Loan-repayment terms range from one to 12 months.
• Loan amounts can be as high as $2,000.
• Borrowers must be credit union members but can apply as soon as they join.

A credit union can offer either type of loan to its members — but a member can only get an offer for one type at a time.

Individual credit unions may have different loan restrictions that fall within NCUA requirements.

Payday alternative loans vs. payday loans

There are several key differences between payday alternative loans and payday loans, starting with who offers them.

Payday alternative loans are offered only by certain federal credit unions — member-owned nonprofit organizations regulated by the federal government that aim to provide financial products at reasonable rates.

Payday loans are often offered by for-profit online or storefront lenders that are often considered as practicing predatory lending.

Some other differences between payday alternative loans and payday loans include the cost of the loan, who may qualify and the amount of risk involved when you apply for the loan.

Loan amounts, fees and terms

You may be able to borrow more money with a payday alternative loan. While payday alternative loans are typically offered in amounts of up to $2,000, payday loans are usually for $500 or less.

And payday alternative loans generally cost less than payday loans. Payday loans can have fees ranging from $10 to $30 for every $100 borrowed — which can amount to an APR of up to nearly 400%. In contrast, the highest application fee for a payday alternative loan is $20.

You’ll typically get a longer repayment timeline with payday alternative loans, too — between one and 12 months. But payday loans typically must be repaid within two to four weeks.

Loan qualifications

If you’re thinking about applying for a payday alternative loan, keep in mind that you’ll need to be a credit union member for at least a month if you’re applying for a traditional PAL (though you may be able to apply for a PAL II as soon as you join the credit union).

You’ll also likely need to demonstrate that you meet some basic financial qualifications, like disclosing the loan’s purpose or not having a recent bankruptcy.

Payday loans may be easier to qualify for, as lenders typically only look at whether you have an active bank account, proof of income and your age. But this may not be a benefit — payday lenders generally don’t consider whether you’re financially able to repay the loan, so you could find yourself in a situation where you borrow but then find repayment difficult.

Payday loans aren’t available in every state, since some state laws prohibit payday lending. And even in states that do allow it, payday lenders may opt out of lending thanks to statewide restrictions on payday loan interest rates and fees.

Rollovers

Traditional payday loans allow multiple rollovers, exponentially increasing the total cost of the loan. The Consumer Financial Protection Bureau found that almost 70% of borrowers take out a second payday loan within a month of their first, and 20% take out at least 10 or more loans. With each rollover, borrowers incur more fees and interest, which can trap them in debt.

If you’re looking for a less-risky loan option, a payday alternative loan could be the way to go. Since you’re limited on how many of these loans you can get at one time, you may be less likely to find yourself stuck in an endless cycle of debt.

How to apply for a payday alternative loan

To find a payday alternative loan, you’ll need to be a member of a federal credit union that offers them. You can find credit unions you may be eligible to join by using the MyCreditUnion.gov Credit Union Locator.

Credit unions have different requirements for membership, and they can set their own standards for who will be approved for a payday alternative loan within the NCUA’s regulatory rules.

Shop around and visit various credit union websites to see their specific requirements for payday alternative loans. Some credit unions even allow members to apply for these loans online.

What other borrowing options should I consider?

If you don’t want to apply for a payday alternative loan in an emergency, here are a few other options you may want to explore.

• Payment plan — If you need money for something like medical bills or overdue utilities, contact your creditor as soon as possible. Explain your situation and be frank about how much you can afford per month. You may also qualify for a hardship assistance program if one is offered in your community, or you could try to negotiate the debt.
• Credit counseling — A fresh set of eyes on your budget may help you find “extra” money to pay off current obligations — and help keep you from accruing more debt in the future. Visit the nonprofit National Foundation for Credit Counseling to find help.
• Payday advance apps — An app like Dave or Earnin may give you small advances. The amounts are relatively low (usually $100 to $500) but could help cover an emergency or a short-term situation.

Bottom line

If you want to borrow a small amount of money affordably, payday alternative loans from credit unions may be cheaper than payday loans. Just remember that if your credit union doesn’t offer PAL II loans, you might need to be a credit union member for at least a month, and sometimes longer, before you can be eligible to apply for a payday alternative loan. And as with any loan, be sure you can pay it back within the loan term before you apply.

But if you aren’t sure if a payday alternative loan would be a fit for your financial situation, alternatives like a credit-builder loan or credit counseling could help you improve your credit scores and strengthen your finances so that you may be eligible for loans or credit cards with lower interest rates in the future.

*Approval Odds are not a guarantee of approval. Credit Karma determines Approval Odds by comparing your credit profile to other Credit Karma members who were approved for the personal loan, or whether you meet certain criteria determined by the lender. Of course, there’s no such thing as a sure thing, but knowing your Approval Odds may help you narrow down your choices. For example, you may not be approved because you don’t meet the lender’s “ability to pay standard” after they verify your income and employment; or, you already have the maximum number of accounts with that specific lender.