Those who find themselves pinched for cash often turn to high-cost payday lenders. But traditional banks and credit unions could serve that role for borrowers and do it at much lower rates, according to a new proposal from the Pew Charitable Trusts.

Right now, millions of consumers who need cash fast — say, to cover an unexpected car repair or to avoid having their utilities shut off — often end up borrowing a few hundred dollars from lenders who offer an advance or their paycheck or hold their car titles as collateral. Such businesses often charge high fees and punishing interest rates, dragging borrowers into a cycle of debt that’s hard to break, said the report published by Pew on Thursday.

“Borrowers need a better option,” Alex Horowitz, senior research officer with Pew’s consumer finance project, said in a call this week with reporters. Pew has done extensive research on “underbanked” consumers, who often turn to payday lenders.

Such borrowers, who often have poor credit, can be kept in the “financial mainstream,” Mr. Horowitz said, if traditional banks and credit unions would offer small installment loans with safeguards that would protect both the banks and the borrower. Payday borrowers typically have checking accounts — they must show regular deposits as collateral for the loans — and many say they would prefer to borrow from their own bank if they could qualify, Mr. Horowitz said. (Some banks do offer small personal loans already, but generally to borrowers with good credit.)