PAL Updated November 11, 2026 8 min read By TrustCedar Rate Desk

Personal Loan vs. Credit Union PAL

For $1,000 or less over a few months, a payday alternative loan from a federal credit union can cost about the same as a personal loan, or less once a loan's fee is counted. A personal loan wins on larger amounts, longer terms and lower APRs.

Maximum PAL rate: 28% (18% ceiling + 10)
PAL I amount and term: $200–$1,000, 1–6 months
PAL II amount and term: Up to $2,000, 1–12 months
18% ceiling runs through: September 10, 2027

Illustration: a columned building next to a person, with an orange circle above

The bottom line

A payday alternative loan (PAL) is a small, short loan that federal credit unions may offer under NCUA rules. The rate can be up to 10 points above the federal credit union ceiling, which the NCUA Board has kept at 18% through September 10, 2027, so PALs top out at 28%, with an application fee of no more than $20. PAL I lends $200 to $1,000 for one to six months to members of at least one month; PAL II lends up to $2,000 for up to 12 months. For $1,000 over six months, a PAL at 28% costs about $103 with the maximum fee. A personal loan at 18% with a 5% fee costs about $109 over the same six months, and about $53 with no fee.

The two tools side by side

PALs exist to give members a small loan without the costs of a payday loan. They are installment loans, like a personal loan, but the National Credit Union Administration caps the amount, the term, the fee and the rate. These limits apply to federal credit unions; a state-chartered credit union follows its own state's rules.

How a personal loan and a credit union PAL compare
Feature	Personal loan	Credit union PAL
Cost	Bank average 11.90% APR for 24 months (Q3 2026); higher for weaker credit	Up to 28%, plus an application fee of up to $20
Rate type	Usually fixed	Fixed, fully amortizing
Amount and term	Set by the lender	PAL I: $200–$1,000, 1–6 months. PAL II: up to $2,000, 1–12 months
Fees	Origination fee at some lenders	Application fee only, capped at $20
What is at risk	Nothing pledged; late fees and credit damage	Nothing pledged; late fees and credit damage
Speed	Days, after an application	Depends on the credit union; PAL I requires one month of membership
Credit effect	Hard inquiry; reported to bureaus	Depends on the credit union's underwriting and reporting

The PAL rules in detail

The rules are in 12 CFR 701.21(c)(7). The Federal Credit Union Act generally limits federal credit unions to 15% a year, including all finance charges, but the NCUA Board may set a temporary higher ceiling for up to 18 months at a time. The Board has kept that ceiling at 18%. The previous extension ran to March 10, 2026; the extension announced on February 6, 2026 runs through September 10, 2027. A PAL may charge up to 1,000 basis points, or 10 percentage points, above the ceiling, which is 28% today.

PAL I: $200 to $1,000, for one to six months. You must have been a member for at least one month.
PAL II: up to $2,000, for one to 12 months, with no waiting period after you join.
Application fee: based on the credit union's actual costs and never more than $20.
How many: one PAL at a time, and no more than three in any rolling six-month period.
No rollovers: a PAL cannot be rolled into a new one, though the term may be extended within the maximum without new fees or credit. Every PAL is paid off in full by its last payment.

If the 18% ceiling changes when the current extension ends, the PAL maximum moves with it, because it is set as a margin over the ceiling. The NCUA reviews the ceiling at least every 18 months.

The 18% ceiling is not only a PAL rule. It covers loans made by federal credit unions generally, including their ordinary personal loans and credit cards, with finance charges included. So a personal loan from a federal credit union cannot charge more than 18% a year, finance charges included, while the current extension lasts, which makes it worth pricing next to a PAL and next to offers from banks and online lenders. A PAL is the one product allowed to go higher, in exchange for its small size, short term and capped fee.

A worked example: $1,000 over six months

Take $1,000 repaid over six months. Route one is a PAL I at the 28% maximum with the $20 maximum application fee. Route two is a personal loan at 18% with a 5% origination fee taken from the proceeds; to receive $1,000 you borrow about $1,053. Route three is the same loan with no fee. The 18% is an example, not a quote.

$1,000 over six months: PAL vs. personal loan (worked example)
Cost line	PAL I at 28%, $20 fee	Loan at 18%, 5% fee	Loan at 18%, no fee
Monthly payment	$180.54	$184.76	$175.53
Interest	About $83	About $56	About $53
Fee	$20	About $53	$0
Total cost	About $103	About $109	About $53

A 5% fee is a large share of a six-month loan: it lifts the loan's APR from 18% to about 36%, above the PAL's 28%. Spread over 12 months, the same loan costs about $158 in interest and fee, with an APR of about 28%. So on small, short loans the fee decides the winner more than the rate does. The origination fee is the line to check first. More on how fees and credit shape an offer in how personal loan rates are set.

When the PAL wins, and when the loan does

The PAL wins when

You need $2,000 or less for up to a year, you belong to a federal credit union that offers PALs or can join one, and the personal loans you are offered carry a high APR or a fee.

The personal loan wins when

You need more than $2,000, want a longer term, or qualify for an APR well below 28% with no fee. The bank average for a 24-month loan was 11.90% in the third quarter of 2026, per the Federal Reserve; see average personal loan rates.

PALs also compete with cash advance apps for small gaps. An advance can cost less for a few days; a PAL is built for a few months. Compare them in personal loan vs. cash advance apps.

The main trap, and a checklist

The trap is timing. PAL I needs a month of membership, so a credit union you join today may not be able to lend you PAL I money this week. PAL II has no waiting period, but not every credit union offers it, and each one sets its own underwriting. Ask before an emergency, not during one. And because the rules limit you to three PALs in six months, a PAL cannot cover a gap that recurs every pay period.

Ask your credit union whether it offers PAL I, PAL II or both, and what it needs to approve one.
Check the membership date. PAL I needs at least one month of membership; PAL II does not.
Compare total cost in dollars for the same term: interest plus the application or origination fee.
Read the APR on each disclosure. On a short loan, a fee raises it sharply. Test a rate change with the rate change calculator.
Plan the payoff. A PAL cannot be rolled over, so make sure the payment fits before you sign.

Sources

We checked the facts on this page against these sources on November 11, 2026. The $1,000 example uses the standard amortization formula; the 18% loan rate and 5% fee are illustrations, not offers, and the PAL is shown at the maximum rate and fee.

Reader questions

What is the maximum interest rate on a credit union PAL?

Up to 10 percentage points above the federal credit union ceiling. With the ceiling at 18% through September 10, 2027, that is 28%.

Can I get a PAL the day I join a credit union?

Not a PAL I, which requires at least one month of membership. PAL II has no waiting period, if your credit union offers it.

How many PALs can I have?

One at a time, and no more than three in any rolling six-month period, under NCUA rules.

Do state-chartered credit unions offer PALs?

The PAL rules apply to federal credit unions. A state-chartered credit union may offer similar small loans under its state's rules; ask it directly.

Put your loan on the board

Five quick answers and your contact details. TrustCedar passes the request to lenders and loan brokers; compare the APRs that come back against the rate board, and say no to any of them.

1 The amount, the purpose, your credit range, your timing and ZIP code.
2 Your name, phone, email and consent to be contacted.
3 A lender or loan broker may reply with an offer. No loan exists until you sign one.

Step 1 of 2

Amount you want to borrow

Any whole-dollar amount from $1,000 to $50,000.

What the money is for

Your credit, roughly

720 or higher 660 to 719 600 to 659 Below 600 I don't know

When you need the money

This week This month I'm watching rates first

Your ZIP code

You pay TrustCedar nothing. The lenders and loan brokers who contact you set their own rates, fees and terms, and decide on credit themselves. How we make money.