A Smarter Alternative to Payday Loans
Payday loans look small until the fees start stacking. See how installment loans and other options compare, and how to cover a cash gap without getting stuck in a rollover cycle.
Installment loans are a common payday loan alternative because you repay in equal payments over months instead of one lump sum. A typical payday fee of $15 per $100 equals almost 400% APR (CFPB), while lenders in the mobiloans network cap APRs at 35.99%.
- Payday loan APR
- About 400%
- mobiloans network APR
- 5.99% to 35.99%
- $500 payday, renewed 3 months
- $450 in fees
- Credit union PAL cap
- 28% APR
The Problem with Payday Loans
A payday loan is a small, short-term loan that's usually due in full on your next payday, about two weeks later. Lenders charge a flat fee, often $10 to $30 for every $100 borrowed. According to the Consumer Financial Protection Bureau, a typical two-week fee of $15 per $100 works out to an APR of almost 400%.
How the Rollover Cycle Works
When the full balance comes due and you can't cover it, many lenders let you pay just the fee and "roll over" the loan for another two weeks. You're charged the fee again, but the amount you owe doesn't go down.
Borrowing $500 for about 3 months
What you still owe over time
Payday loan
- Week 2Owe $500
- Week 4Owe $500
- Week 6Owe $500
- Week 8Owe $500
- Week 10Owe $500
- Week 12Owe $500
Installment loan
- Month 1Owe $338
- Month 2Owe $172
- Month 3Paid off
Cost Comparison: Borrowing $500
| Option | Interest and fees | After 3 to 6 months | How you repay |
|---|---|---|---|
| Payday loan, renewed every 2 weeks for 3 months | $450 in fees | Still owe $500 | lump sum |
| Installment loan, 35.99% APR, 3 months | $30.29 | Paid off | 3 payments of $176.76 |
| Installment loan, 35.99% APR, 6 months | $53.78 | Paid off | 6 payments of $92.30 |
| Credit union PAL, 28% APR, 6 months | $61.62 | Paid off | incl. $20 application fee |
Illustrative estimates. Installment examples assume equal monthly payments and no origination fee.
The difference is structure, not just rate. With installments, every payment reduces what you owe. With rollovers, you can pay hundreds in fees and still owe the original amount.
Better Alternatives to Check
Online installment loan
$200 to $5,000 repaid over 3 to 24 months. Lenders in our network cap APRs at 35.99%.
Credit union PAL
$200 to $2,000 at no more than 28% APR, for members of federal credit unions.
Payment plan with the biller
Utilities, hospitals and landlords often spread a bill out with little or no interest.
Employer paycheck advance
Some employers advance earned wages for free through payroll.
Cash advance apps, with care
Small and fast, but express fees and tips can add up to a high APR.
Local assistance
Dial 211 to find help with rent, utilities and food in most of the U.S.
Already Have a Payday Loan?
- Ask about an extended payment plan. Several states require lenders to offer one at no extra cost.
- Avoid rolling over again if you can. Each renewal adds a full fee.
- Talk to a nonprofit credit counselor. Look for NFCC member agencies for free or low-cost help.
- Consider replacing it with a lower-cost installment loan only if the new payment fits your budget.
Payday Alternative FAQ
Why are payday loans so expensive?
Payday loans charge a flat fee, often $10 to $30 per $100 borrowed, for about two weeks. The CFPB notes a typical $15 fee per $100 equals an APR of almost 400%. If you can't repay in full, renewing the loan adds another fee while the balance stays the same.
Is an installment loan a good payday loan alternative?
For many borrowers, yes. You repay in equal payments over several months, so the balance falls each time and there's no single lump sum due on payday. Lenders in our network cap APRs at 35.99%.
Are payday loans legal in every state?
No. Some states ban them or cap rates low enough that payday lenders don't operate there, while others allow them with limits on fees or rollovers. Check your state regulator's website for current rules.
What if I already have a payday loan?
Ask your lender whether your state requires an extended payment plan, which some states mandate at no extra cost. A nonprofit credit counselor can also help you plan a way out of repeat borrowing.
Sources: Consumer Financial Protection Bureau, National Credit Union Administration. Reviewed by the mobiloans editorial team, October 3, 2026.
Related Guides
Skip the Rollover Cycle
Fixed payments over 3 to 24 months, with every cost shown before you sign.