Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.
11 alternatives to payday loans during the coronavirus outbreak
Grants, nonprofit assistance and other options to cover your bills.
With so much economic uncertainty, payday loans might not make a lot of sense right now. They’re meant to cover emergency costs when you know you’re going to get paid, but need money now. If you miss that payment — say you lose your job or don’t get unemployment benefits on time — you risk getting caught in a cycle of debt. Luckily, there are several less-risky alternatives to payday loans during the coronavirus outbreak.
1. Emergency loans from your bank or credit union
Some banks and many credit unions are offering emergency or hardship loans to help cover expenses during the outbreak. Typically, you can borrow up to around $2,000 and pay it off over one to two years. Most come with around three to six months of deferred payments and low or no interest.
In most cases, you need to be a banking customer or credit union member to qualify, often before the coronavirus outbreak began. Some institutions aren’t advertising these loans, so reach out to find out if any are available to you. If you can’t get through by phone, try emailing or using the live-chat feature on your bank or credit union’s website.
2. Industry organization grants
If you’ve lost your job due to the coronavirus outbreak, you might be eligible for a grant from an industry organization, like the National Restaurant Workers Association or Freelancer’s Union.
Typically, these grants run around $500 to $1,000. They’re often available based on financial need, so you might not qualify for a grant if you already have savings. These often run out fast, so apply as soon as you can.
3. Government and local financial assistance
Some local governments and organizations are offering financial relief to individuals who’ve been hurt by the coronavirus pandemic. These usually aren’t cash grants or loans, but relief for specific expenses like utilities, rent or mortgage, Internet or even transportation.
For example, San Francisco is offering low-cost Internet and emergency loans for homeowners. And it’s also reimbursing essential workers for up to 10 taxi rides a month. Washington State is offering up to $1,000 in rental assistance grants and up to $500 in energy assistance grants to low-income households. Check with your local and state government to see what’s available to you.
4. Medical bill assistance
You have several payment assistance options available to help with medical bills during the COVID-19 outbreak. Many hospitals and healthcare providers allow patients to pay off bills using an interest-free installment plan. Some also offer medical financing like loans and credit cards directly. These new credit cards often come with a 0% APR promotional period, though there are usually credit and income requirements.
Some private organizations also offer medical debt assistance. For example, the nonprofit RIP Medical Debt raises money to buy up medical debt from individuals at a discount. Medical bill advocates can also negotiate with your healthcare providers on your behalf to help you reduce your debt load.
5. Payday alternative loans
Some federal credit unions offer payday alternative loans (PALS) as a more affordable alternative to short-term loans. Through these programs, you can borrow from $200 to $1,000 at a fixed 28% APR with terms from one to six months.
Typically, you need to join the credit union to qualify, and there may be employment requirements. These aren’t available at every federal credit union, and many don’t advertise them, so reach out to customer service to see if they’re available where you bank.
6. Pay advance apps
Pay advance apps give hourly workers an advance on wages you’ve already earned. Typically, you can borrow up to $100 or more per month in exchange for an optional tip or a monthly subscription fee.
While this won’t help if you’ve lost your job, it can be useful for essential workers. And since it’s based on wages you’ve already earned, it can be less risky than a payday loan.
Compare payday advance apps
7. Bad-credit personal loans
Some personal loan providers offer loans to borrowers with bad credit. These can run as high as $100,000 — though you likely won’t qualify for that amount with bad credit — and APRs typically stop around 36%. These are generally less expensive than short-term loan options like installment loans. But you need to have regular, reliable income to qualify.
Find a personal loan for borrowers with bad credit
8. Lending circles
A lending circle allows you to borrow from and lend money to your peers. It works by having everyone pay a small amount into the pool each month, with one member of the lending circle taking the pool each month.
You can set one up with your friends if several members of your social circle are short on cash. Or, you can join a lending circle through companies like Esusu, eMoneyPool and Mission Asset Fund.
9. Credit card cash advances
Most credit cards allow you to withdraw money from an ATM for a fee. You’ll also typically pay a higher interest rate on a cash advance than purchases, but it’s still usually less expensive than a payday loan. With no fixed due date, you won’t have to pay late fees if you can’t pay off your full balance right away. But that interest will continue to add up each month, so pay it off as soon as you can.
10. Pawn loans
Pawn shops offer loans using a valuable item as collateral, like jewelry or electronic devices. To get your item back, you’ll have to pay back the loan plus interest and fees. Generally, these don’t run much higher than $150 and rates can top 200% APR. But they’re still less expensive than most payday and installment loans.
11. SBA coronavirus loans
Independent contractors and self-employed individuals can qualify for loans through the Small Business Administration’s (SBA) Economic Injury Disaster Loan (EIDL) Program or Paycheck Protection Program (PPP). Both offer low-cost financing to cover payroll and operating costs, which can make up for lost income if you’ve taken a hit during the outbreak.
PPP applications reopened in January 2021 with an end date of May 31, 2021. And a new payroll formula allows you to calculate your PPP loan amount based on your gross income, instead of your net profit.
The EIDL Program doesn’t currently have a deadline, but funding is limited — so apply as soon as possible.
Before turning to high-cost payday loans, check with your local bank, credit union and government to see what resources are available to individuals affected by the coronavirus outbreak. You can explore even more options with our guide to COVID-19 financial assistance programs.
Frequently asked questions
Answers to common questions about alternatives to payday loans during the coronavirus.
Do I need good credit to get financial assistance during the coronavirus outbreak?
Generally no, there are many options available to borrowers with bad credit. Even banks and credit unions offering emergency loans typically waive credit requirements — though you might want to check first.
How long does it take to get an emergency grant?
That depends on the grant program. Some programs promise funds in a few days, though many haven’t been able to meet that goal. Grant programs that offer multiple rounds of funding can take as long as a few weeks or even a month.
Can I get a payday loan if I’m unemployed?
Not unless you’re already signed up for unemployment benefits. While you don’t necessarily need to have a job, most states require payday lenders to check your proof of income.
More guides on Finder
Your business could soon qualify for a $500K disaster loan
An EIDL will now cover two years of working capital expenses for businesses affected by COVID-19.
Stimulus throws restaurants a lifeline with new grant program
The Restaurant Revitalization Grant offers grants of up to $10 million to make up for revenue lost during COVID-19.
Texas disaster assistance for the 2021 Winter Storm
Here’s where to get financial help for yourself and your business if you’ve been affected by the storm in February 2021.
NY expands COVID-19 small business loan program
Now 90% of all small businesses in New York State can qualify for NYFLF.
PPP loans now available at community banks and other ‘small’ lenders
Lenders with less than $1 billion can submit applications to this COVID-19 assistance program before it fully reopens Tuesday.
What to do if your PPP loan is too small to help
The PPP wasn’t made with sole proprietors and independent contractors in mind. Here are other options that can help.
How to apply for a Second Draw PPP loan
You only have until May 31, 2021 to get your next application in.
SBA reopens PPP loan applications — but not for everyone
First Draw loans are now available through nonprofit lenders, with Second Draw loans following shortly behind.
What the second stimulus means for your small business
You might be able to apply for more funding on your PPP loan, get a second PPP loan or take advantage of a new grant program.
More PPP loans, grants could be coming with new emergency relief act
Here’s how the ECRA could affect small business owners — if it’s passed.
Ask an Expert