If you’re like most people, costly repairs and medical bills seem to strike just when bank funds are at their lowest. This can leave you scrambling to pay rent or buy groceries just days away from your next paycheck—and weeks away from a standard loan approval. If you’re like almost 56 million other bank account holders, you can choose to bounce checks to cover any unexpected expenses. However, with overdraft fees ranging anywhere from $15-$50 per bounced check; paying out money you don’t have can lead to bigger financial problems down the road. Enter payday loans. Payday loans, with their quick approval time, can provide just enough cash in just a little time. And, if you decide for online payday loans, the turnaround time is even faster.

But what exactly are payday loans? Understanding what payday loans are can help consumers avoid bank overdraft fees.

What is a payday loan?

Payday loans are small loans taken out for short periods of time with the understanding that—when the borrower gets paid—the lender will be reimbursed for applicable fees and the initial loan amount.

Benefits of payday loans.

* Fast turnaround. Payday loans offer cash in as little as 15 minutes, making them a good option for anyone in a financial emergency.
* Cheaper than bouncing checks. Often, paying the fees associated with payday loans is cheaper than overdraft services provided by banks.
* No credit check. If you have bad credit, getting a payday loan is not out of the question. Often, all that is required to obtain a payday loan is proof of identification, a postdated check, and proof of income.
* Avoid lower credit scores. Remember, every time you miss a credit card payment or a car payment, your credit score drops. Payday loans can help you make payments on time, thus protecting your credit score.

Drawbacks of payday loans

* Fees. While the fees associated with payday loans aren’t called “interest,” they really are. Generally, these fees are quite high, and can add up very quickly if you don’t pay the loan back in the time allotted. On average a 14-day loan of $100 will garner “fees” equivalent to 416%-988% in interest. Add on additional repayment time and late fees, and it becomes increasingly difficult to pay off what was a small loan.
* Lower amounts. You may be able to buy groceries or pay the utility bill on time, but don’t expect to pay higher mortgages or a multitude of other payments. While payday loans are fast, they also tend to be small. Don’t plan on receiving a loan for much more than $500 or so.
* Disreputable lenders. Payday loans are generally provided by what are called “fringe providers.” These are non-banking entities that are not as well-governed as banks or other finance institutions. Put simply, don’t expect the same service in a pawn shop that you would at the corner bank.

While payday loans do carry inherent risks, they provide a viable way for those suffering brief financial hardship to pay bills without incurring overdraft fees. As a result, payday loans are quickly becoming one of the fastest-growing loan products available today. And why not? After all, for the savvy consumer, payday loans can offer just enough cash in just a little time.