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Credit Union Loan vs Payday Loan: Which Is Cheaper

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Two ways to borrow, one usually much cheaper

If you're short on cash this week, you may be looking at a payday loan store or a credit union. Florida law caps what a payday loan can cost. A credit union loan made for exactly this situation — called a Payday Alternative Loan, or PAL — has its own cap, and it's lower. Here is what each one really costs, in plain numbers, so you can compare before you sign anything.

Florida payday loan: what it really costs

• Capped at $500.
• Fee capped at 10% of the amount, plus a $5 verification fee.
• Term of 7 to 31 days.
• Only one payday loan at a time statewide, with a 24-hour wait required between loans.
• An installment version ("deferred presentment installment") goes up to $1,000, with its own fee caps.
• The lender must be licensed by the Florida Office of Financial Regulation.

Example, using the caps above: a $500 payday loan would cost about $50 in fee plus the $5 verification fee — roughly $55 for a loan of a few weeks. This is an approximate example, not a quote — get the exact number in writing from the lender. Source: Fla. Stat. ch. 560 Part IV — Florida OFR.

Credit union Payday Alternative Loan (PAL): what it really costs

• Offered by federal credit unions.
• Loan amounts from $200 to $2,000.
• Annual rate capped at 28% — far lower than a payday loan's fee, spread over a much longer term.
• Term of up to 12 months, instead of a few weeks.

You have to be a member of the credit union, sometimes for a short waiting period, to get a PAL. Ask a local credit union if they offer one and what the exact monthly payment would be for your amount — the 28% cap is a ceiling, not necessarily what you'll be charged. Source: NCUA — Payday Alternative Loans.

Which is cheaper, and what a title loan is not

For the same dollar amount, a PAL's 28% annual cap will almost always cost less than a payday loan's per-loan fee, especially because the PAL gives you months to repay instead of weeks. But the real number depends on how much you need and how long you take to repay — ask both lenders for the exact figure in writing before you decide.

A title loan is a different, riskier product. Florida limits title loans under Fla. Stat. ch. 537, but the real danger isn't the fee — it's that you can lose your car if you can't repay. Avoid a title loan if a credit union or an assistance program can cover the gap instead.

Before you borrow at all

• Call the utility company or landlord directly and ask for an extension or a payment arrangement, before the due date.
• Call 211 for utility, rent, food, and medical assistance programs in your county: 211 Florida.
• Ask your employer's HR office about a pay advance.
• A free first session with a nonprofit credit counselor can help you weigh all of this by phone: NFCC.

If you already have a payday loan and can't repay it

Florida allows only one payday loan at a time, and rolling it over into a new loan is not allowed here. If you cannot repay it, you have the right to a 60-day grace period if you complete credit counseling — this is written into Fla. Stat. 560.404(19). A credit union PAL can sometimes be used to pay off and refinance an existing payday loan at the lower 28% rate — ask the credit union directly.

What to do next

This page cannot know your amount, your deadline, or what you have available. A free tool can read your own numbers — how much you need, by when, and what you have — and lay out your real options in order, cheapest first, with the dollar cost of each one next to it. Nothing you type is stored, and there's no account.

This is not legal or financial advice, and costs shown anywhere are approximate. Confirm any loan's exact terms in writing before you sign, and check that a Florida lender is licensed at flofr.gov.

Emergency Cash Options lists borrowing and assistance options in plain language with approximate costs; it can be wrong, and it is not financial or legal advice. Florida payday-loan rules are cited from Fla. Stat. ch. 560 as published — confirm with the Florida Office of Financial Regulation. Nothing you type is stored.