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Are Payday Loans Cheaper than Unarranged Overdrafts?

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If you are in need of a short-term solution to financial worries there are often only a few possible options open to you. You may be unable to borrow money from family members or friends to help you get through this tough period. The other options are to take out a payday loan or go over your current account limit with your bank. With the latter, you can set up an unarranged overdraft.

My Financial Broker understands that there is often scepticism around the payday loan market. But when you compare our service to that of an unarranged overdraft, it can quickly become apparent that it might be better to utilise a short-term loan rather than delve into your overdraft unannounced.

Unarranged Overdrafts

A study by Which? in 2016 found that for many high street banks, the charges for using an overdraft facility without prior agreement with the bank can cost up to £90 over the course of a month. This charge is based on borrowing £100 within this time frame. This is due to the banks stating that it should always be a last resort. Other forms of borrowing are available via their facilities, and at a cheaper rate. For many people, though, these are not viable options as they would not qualify for assistance.

It can be difficult to work out exactly how much it will cost you if you end up using your overdraft without an agreement with the bank. But the survey found that the charges range from £20 to £90 depending on who you bank with. Compare this to the associated charges on a payday loan over the same period! You can see why many people choose to look for assistance from a payday loan lender.

One thing is for sure, having no cap on the charges leads to wildly differing rates depending on your bank. In addition to this, although many banks now have a text message alert system to warn their customers when they are overdrawn, and how long they have to prevent a charge, this isn’t always enough to stop an individual stacking up bank charges.

Payday Loan Agreements

Every payday loan provider is different, but with a £100 payday loan, with a repayment period of one month , you should get a much better payback term than an unarranged overdraft with your high street bank. The interest you’d pay on top of the £100 you borrowed is unlikely to be more than £24.

Lenders try to make it as easy as possible to see exactly what you have to repay, including interest, so there are no hidden costs. Do bear in mind though that payday loans are a short-term fix and you should not use them as a long-term financial solution. That could mean the interest rate would cause greater problems for the individual.

My Financial Broker offers a simple solution to your short-term financial needs. Our application process takes minutes to complete and is 100% online. All we need from you to get started is a few personal details, your income and expenditure, employment information and bank account details. You can choose to take out a payday loan with one of our lenders from £100 up to £2000.

Taking out a payday loan via My Financial Broker is a sensible option for those seeking short-term financial assistance. Compared to unarranged bank overdrafts it is a no-brainer to utilise the experience of a payday loan lender with no hidden costs.

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