Wells Fargo has launched a small loan to customers that allows them quick cash at a flat rate. This joins several other banks offering similar products, which are designed to help people avoid expensive options such as payday loans.

Customers of Wells Fargo can apply for a Flex Loan for $250 or $500 via their mobile app. The flat fee is $12 or $20. Once approved, the funds are deposited to the borrower’s account in seconds. The loan is then paid back in four monthly installments according to Wells Fargo.

The key takeaway: If you need to cover an expense or avoid overdraft fees, many banks offer short-term, small loans that are less expensive than payday loans.


Large banks offer small loans

Wells Fargo’s new Flex Loan is one of four banks that The Pew Charitable Trusts cites as offering small, low-cost loans that could be an alternative to more risky, and sometimes more expensive, loan options for minor expenses or emergencies.

  • Wells Fargo The Flex Loan from Wells Fargo will be available in two amounts by the end the year: $250 with a $12 Fee and $500 with a $20 Fee. Borrowers repay their loan amount in four monthly installments and pay no interest.
  • Bank of America Customers can borrow up $500 from the bank using Balance Assist. This option charges a flat $5 and is paid in three monthly installments. There’s no interest.
  • Huntington National Bank Customers are able to apply for a digital-only $100-$1,000 credit line with the bank’s Standby Cash Program. This program is interest-free if automatic payments have been set up. The three-month repayment period is for the bank’s Standby Cash program.
  • U.S. U.S. Bank: A Simple Loan allows customers to borrow up $1,000 in $100 increments. There is a $6 fee per $100 borrowed (and no interest). The loan is repaid in three monthly installments.


Short-term loans

There are many other options available than the four bank loans. These loans have terms that are better than payday loans. They can be used to help with financial emergencies or between paychecks.

  • Short-term loan called “payday alternative loan” Credit unions can offer payday loans up to $2,000. Credit unions don’t charge any application fees above $20, and interest rates are limited to 28%.
  • Payday advances apps — Apps such as Dave and Earnin could allow you to borrow a part of your next paycheck. Although the amounts are usually $100 to $500, they can help you cover an emergency.
  • Cash advance — A cash advance is essentially a loan that you use your credit card balance to get a short-term loan. Cash advances can be expensive due to higher interest rates and fees.


Avoid High-interest loans

Payday or title loans have high fees and terms that can be difficult to repay. Payday loan borrowers often refinance or roll over the money borrowed, which can lead to additional fees.


Avoid these costly forms of borrowing.

  • Payday loans A short-term loan of $500 or less for a small amount is called a payday loan. It’s due by your next payday along with any fees. According to the Consumer Financial Protection Bureau, a $500 loan for two weeks would cost $15 per $100 borrowed. This amounts to almost 400% annually.
  • Title loans for autos — A title loan works in the same way as a payday loan. It’s usually a short-term, often 30 day loan. You give the lender your vehicle title in exchange for the loan. If you are unable to make the payment, your vehicle is at risk.