Some of the largest American banks now offer what are known as “small dollar loans”: either low-interest or flat-fee loans of different sizes up to $1,000, available almost immediately and with few application hurdles.

Often less expensive than running up a credit card balance, these loans are significantly cheaper than typical payday loans, which charge high effective interest rates and must be repaid quickly. Because small dollar loans require no collateral, you don’t risk having your vehicle repossessed, as you might if you fall behind on a title loan.

By last fall, banks operating about 23 percent of all branches in the U.S. were offering these loans: Bank of America, Huntington, Regions, Truist, U.S. Bank and Wells Fargo.

“We’ve been monitoring financial products for many years, and we view these small dollar bank loans as a better opportunity for consumers than payday loans,” says Lori Trawinski, director of finance and employment at the AARP Public Policy Institute. “I think it’s almost like a throwback to how banking used to be, when you would do business with a local bank and the bank would know you, and people were often able to get credit because of the relationship they had with the local bank.”

These small dollar loans, typically available only to banks’ current customers, have a straightforward application process. Approvals and funding can happen almost immediately. Terms and requirements vary by bank. To get a loan through Bank of America’s Balance Assist, for example, you need to have a qualifying checking account at BofA that’s been open for at least a year (2½ years if you don’t have a credit score), maintain a positive balance in all your BofA checking accounts, and make regular monthly deposits in your account.

For U.S. Bank’s Simple Loan, you need to have a personal checking account open for at least six months, with three months of recurring direct deposits. In both cases, the bank will check your credit. The application is on the bank’s website and mobile banking app.

“We know when consumers are in financial distress, they focus on speed to get the money. Is it a sure thing, and how long will it take to get approved?” says Alex Horowitz, principal officer focusing on consumer finance for the Pew Charitable Trusts. “These loans are available 24/7. You can get it from your phone or laptop, and the money is in your account within minutes.”

Most small dollar loans come with a specific repayment schedule—three to four monthly payments in equal installments, with the first payment due 30 days after the money lands in your account. Those payments are typically deducted from the account where the funds were originally deposited.

In this way, these short-term loans are unlike a credit card balance, which comes with no repayment deadline—just the obligation to make a minimum monthly payment. Small dollar loans are, for the most part, also unlike payday loans; if you don’t fully repay a payday loan on time, the outstanding balance can typically be rolled into a subsequent loan. A small dollar bank loan usually has to be paid off completely before you can take out a new one.

“Before you take out any loan, you want to make sure you understand the terms and obligations of repayment—fees, interest rate, minimum payment and deadline for paying it off,” Trawinski says. “That’s especially true if you’re used to having payday loans, which are often rolled over.”

The effective interest rate you pay on these loans can vary based on the bank you use and, in some cases, the size of the loan. The annual percentage rate (APR) for Regions’ Protection Line of Credit, for example, is currently 12 percent, compared with a national average rate of more than 20 percent for credit cards.

The flat fees attached to other loans translate into different interest rates based on the size of the fee and the amount of time you have to repay the loan. Bank of America’s Balance Assist, for example, costs $5 per loan, no matter the size, and must be paid back in three months; that translates into an APR of as little as 6 percent for a $500 loan and nearly 30 percent for a $100 loan.

Even at the high end, these rates can be much lower than other options for people who have a difficult time obtaining credit. The government’s Consumer Financial Protection Bureau points out that terms for a typical payday loan—a fee of $15 per $100 and a two-week repayment period—result in an APR of almost 400 percent.

As with any other loan, late repayments or failure to repay may negatively affect your credit score. Not repaying on time may also reduce your chances of getting a future small dollar loan from the same institution.

These new loan programs came after federal regulators expressed concerns that too many banking customers with low balances in their accounts were being tripped up by complicated overdraft rules, resulting in expensive fees. So alongside their introduction of small dollar loans, most of these banks have modified their overdraft rules to be less financially burdensome. “Consumers are on track to save more than $5 billion annually because of the overdraft changes,” Horowitz says.

Low-cost loans may also be available at credit unions and some smaller banks. The National Credit Union Administration allows for two different types of payday alternative loans to be offered by federal credit unions: a loan of up to $1,000, which has to be repaid in one to six months, and a loan of up to $2,000 that must be repaid in one to 12 months.

“Six years ago, there were zero major banks offering these small installment loans or lines of credit,” Horowitz says. “We expect that this will continue to spread.”