Payday loans are a last-resort option when you have an emergency that can’t wait. And they’re expensive. Even the most competitive payday loans come with fees equivalent to APRs over 700%. The best short-term lenders follow federal and state law, are transparent about costs and can get you amount of money you need it when you need it. But before you apply, read about the alternatives to make sure there isn’t a better option.
As many states move to tighten laws on short-term lending, we checked each lender’s legitimacy, business practices and website security. We also weighed borrower reviews on the Better Business Bureau and Trustpilot.
We then analyzed and compared each lender’s maximum loan amounts, APRs and funding speed. And because some lenders are moving from payday loans to installment loans, we paid extra attention to lenders and connection services that offered both options so you can compare loans more easily.
What features make a short-term loan the best for you?
Here are some simple questions you should ask yourself while searching for a short-term loan:
Is there a store network and online presence? Any lender that calls itself the best short-term loan company should offer you convenience when it comes to borrowing. This may mean they have a wide network of stores across the country or that they let you apply for and manage your loan online.
How long does it take to process the loan? Some of the best short-term loans ensure that you have access to the approved funds the following business day. A limited number of lenders provide prepaid debit card loans which can give you access to funds quickly after approval by transferring the amount to your eligible card. You can then use the money anytime and anywhere.
Are you aware of all the fees? While some of the best short-term loans provide quick access to funds, take the time to find out just how much you’ll have to pay in the form of fees. The best short-term loan company in this regard is the one that charges the lowest fees. Remember how much you borrow affects how much you have to pay.
Does the lender accept bad credit applications? If you’re looking for the best bad credit short-term loan, take into account that most short-term lenders accept applications from individuals who don’t have good credit history. If the lender you’re looking at requires good credit history and you aren’t eligible, simply move on to the next.
Freedom to use the money as you like. You apply for a short-term loan no matter what reason you need the money.
Bad credit is OK. short-term loan providers will accept applications from people with poor credit histories, but make sure you compare other aspects when looking for the best bad credit short-term loan.
Higher than normal fees. Even the best short-term loan company will charge fees for providing loans, and short-term loans tend to attract higher fees in comparison to conventional loans. A general rule of thumb is that the more you borrow, the more you pay in the form of fees.
Disreputable lenders. If a short-term lender sounds great and is offering rates too good to be true, be sure to find out if they are. Ensure the lender complies with all relevant state regulations and that they are operating legally.
Not always available. Some states don’t allow short-term loans. If you live in one of them, look into installment loans or personal loans instead.
6 payday loan alternatives
Before you apply, look into other options that are cheaper, more sustainable in the long-run or have more flexible repayments.
Pay advance apps. Hourly workers can get an advance on wages they’ve already earned, sometimes for free — though some might charge a monthly membership fee.
Payday Alternative Loans (PALs). These low-interest loans are available at federal credit unions with rates capped at 28% APR and a loan term as long as six months.
CDFI loans. Community financial development centers (CDFIs) are banks and credit unions with a social mission. They typically offer low-cost financing to people who typically can’t qualify for a loan, like those with bad credit or bankruptcies.
LendingCircles. These allow you to lend and borrow money from your peers. Each month everyone in the circle contributes to a pot, which goes to one member until everyone got a loan. You can join one online for a fee or create one with your friends.
Local government resources. Your state and local government likely has benefits programs to help cut down on monthly expenses. Some also offer grants to people affected by natural disasters or events like the coronavirus outbreak.
Mutual aid groups. These community-based organizations are designed to pick up where the government left off. They offer free meals, food pantries and community fridges and can make room in your budget.
Watch out for overborrowing
Before you apply, ensure that you won’t have any problems in repaying the loan. If you think you might have trouble, don’t take out the loan. Late or missed payments come with increased fees, charges and interest rates on top of negatively impacting your credit. Always work the repayment schedule into your budget, and the best loans will remain the best.
Know that even the best short-term loans can end up costing much more than originally anticipated, especially if you don’t repay your loan on time.
Bear in mind that while the best short-term loans will give you quick access to the money you need, there are a number of good short-term loan providers vying for your attention, so compare all your options before applying.
Are payday loans available in my state?
Frequently asked questions
We understand that you may be cautious when applying for short-term loans. Here are some of the frequent questions our users have asked.
What is a payday loan?
Payday loans are short-term forms of financing that are typically available in amounts ranging from $50 to $500, depending on your state of residence. And they’re expensive — most come with high fees that translate to APRs in the triple digits.
Elizabeth Barry is Finder's global fintech editor. She has written about finance for over six years and has been featured in a range of publications and media including Seven News, the ABC, Mamamia, Dynamic Business and Financy. Elizabeth has a Bachelor of Communications and a Master of Creative Writing from the University of Technology Sydney. In 2017, she received the Highly Commended award for Best New Journalist at the IT Journalism Awards. Elizabeth's passion is writing about innovations in financial services (which has surprised her more than anyone else).
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