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Financial Alternatives

The True Cost of Payday Loans

Payday loans cost a lot more than $15 per $100 borrowed.  Here is a list of how much a payday loan could cost you compared to the alternatives:

Interest Paid

Total payment over 1 year

Type of Loan



1 Month

2 Touch & Go’s

5 Months

10 Touch & Go’s

1 Year

25 Touch & Go’s

Principal + interest

Payday Loan







Consumer Finance Company







Credit Card Advance







Credit Union







Credit Card (no min. payment)







Military Relief Societies







Most short term loans are taken out over 1-2 months but many payday loan customers end up getting trapped in a cycle of debt for much longer than that.  But as you can see, even if they loan is repaid within one month, a consumer could have saved up to $145 by finding an alternative loan.  Some alternatives to payday loans are listed below. 

Alternatives to Payday Loans

Payment Plan with Creditors:  Face the Problem Head On

Many creditors will work with you to create a new payment structure to include partial payments over a longer period of time.  It is important to see what they may charge for this service, but it will most likely be less than the fees and interest charged by payday lenders.  This is often the best option for those facing debt problems. 


Loans from Family and Friends: Look to those who love you

This may be an embarrassing situation for you but true friends and family would rather help you themselves than see you become trapped in a cycle of debt by a payday lenders.  Everyone goes through tough financial times and asking for help is OK. 


Advances from Employers: Using money that is already yours

Many employers will work with employees if they need a paycheck advance for emergency expenses.  The advantage of this method is that there are no fees or interest since this is not a true loan, only an advance. 

Small Business Owners – Download a Sample Memo about Payday Advances to Employees

Sample Text for a Policy on Payday Advances

Consumer Credit Counseling: When you need some advice about debt problems

The Federal Trade Commission suggests that people look into working with consumer credit counseling services to create a debt repayment plan that fits your budget.  These services are usually available at little to no cost through non-profit groups, employers, credit unions or banks, and housing authorities.  See below for links to some groups in Virginia:

National Foundation for Credit Counseling – – 1-800-388-2227


Consumer Credit Counseling Services

 Southwest Virginia – – 1-866-260-5994


Catholic Charities of Eastern Virginia, Inc.

          – 757-484-0730

          Offices in Virginia Beach, Chesapeake, Franklin, Newport News


Commonwealth Catholic Charities


          Offices in Richmond, Ashland, Blacksburg, Charlottesville, Chester, Highland Springs, Lexington, Lousia, Mineral, Norton, Orange, Roanoke, Staunton


Center for Child and Family Services, Inc. (Consumer Credit Counseling Service of Hampton Roads)

          – 757-826-2227

          Offices in Hampton, Williamsburg, Yorktown


Alliance for Families and Children of Central Virginia (Consumer Credit Counseling Service of Central Virginia)

          – 434-845-5944, ext. 237

          Office in Lynchburg

Emergency Assistance Programs: Look to your community for help

Many communities have faith-based and community organizations that will provide emergency assistance to those in need, either directly or through social services programs.  Look into your community for further help locating these services.  A good starting point is your city/county or state Social Services department. 

Virginia Department of Social Services –

Credit Union Loans: Help from your bank

As payday lending became more prevalent throughout the United States, credit unions began offering alternative programs for their customers.  These loans are usually at an interest rate that is well below those of payday lenders, usually ranging from about 10%-20% APR and sometimes a small one-time fee.  These loans are usually approved quickly and some credit unions offer a streamlined process if you enroll in their program.  There are many credit unions offering such services in Virginia. 

Click for a list of Virginia Credit Unions offering payday loan alternatives

Cash Advances on Credit Cards: Use a lower interest rate loan

Credit card cash advances are usually offered at about 30% APR, much cheaper than a payday loan.  There are even some credit card companies who work specifically with people who have poor credit or financial problems.  A secured credit card is also an option.  A secured credit card is tied to a savings account and the funds in the account ‘secure; the amounts charged on the card.  Using this type of card can help you qualify for a regular unsecured credit card.  Consumers should be careful to research the companies they plan on using and do not assume that you will qualify for a credit card.


Military Loans:  Relief Societies

There are military relied societies for all branches of the military.  They provide emergency funds to active duty, reserves, and direct dependants of military personnel, usually at no cost and with flexible repayment plans.  Even though payday loans have been capped at 36% APR for the military, this is a better option for those looking for emergency funds.  Please refer to the website for your branches relief society listed below:

Military OneSource – 1-800-342-9647

Navy-Marine Corps Relief Society –

Army Emergency Relief –

Air Force Aid Society –

Coast Guard Mutual Assistance –

Small Consumer Loans:  Better options

There are many small consumer-finance companies that offer small, short-term loans that can cost up to 60% ARP, but usually cost about 25-36% APR.  These rates are much lower than those of payday lenders and you can also receive up to $1000 for a year and pay much less than a $200-300 loan from a payday lender over a year.  This is a good option for those who need larger amounts of money or have expenses that will extend beyond the two week period of most payday loans. 

For more information

See the Center for Responsible Lending or call the Federal Trade Commission for free information on consumer issues at 1-877-FTC-HELP (1-877-382-4357) or at .


“Alternatives to Payday Loans” published by The Center for Responsible Lending

“Payday Loans = Costly Cash” published by the Federal Trade Commission Bureau of Consumer Protection, the Office of Consumer and Business Education

“Payday Loan” published by Wikipedia

“How Much Interest Do You Pay to Borrow $500?” and “Alternatives to Predatory Lending” published by the Virginia Partnership to Encourage Responsible Lending

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Contact your legislators and urge them to cap/repeal payday lending in the State of Virginia!

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