Are Overdraft Facilities More Expensive Than Payday Loans

Disadvantages Of Overdrafts And Payday Loans

There is a disadvantage with both the payday loans and the overdraft. The greatest disadvantage being that the interest rates are sky high. However, with the overdraft, there is another disadvantage. If you fail to pay the debt, your debt increases further. However, if you fail to pay the minimum amount which needs to be paid back, your bank may turn your account to a collection agency. This way, your credit score gets damaged badly and you may not be able to get loans in the future, even if they are pre planned loans unlike overdraft facilities.

Alternatives To Overdraft Facilities

Instead of availing the overdraft facilities or taking a payday loan, one could plan and get a planned loan before the amount in the account gets to zero. This way, the interest on the loan would be around 10% at maximum which is far less than the interest rate on the payday loans which may reach up to 2000% and on the unplanned overdraft facilities which have higher interest rates than even the deadly payday loans. It is always better to plan for your future rather than doing things at the last moment and regretting it later.

The Bottom Line

The conclusion of the whole case would be that one always needs to prepare his budget well in advance even incorporating the emergency funds one might need if the need arises. Another important thing is to always know the funds available in your bank account even if you do not wish to withdraw it. This makes the person well aware of his realties. And lastly, if the need be, as can happen to anyone, one should only avail the benefit of the advance loans as they are affordable as compared to payday loans and the overdrafts which are 7 times as costly to payday loans. The advance and planned loans may check your credit score and sometimes even take a little time, but in the long run, they are far better as you don’t end up in a spiral of debt forever.

Leave a Reply

Your email address will not be published. Required fields are marked *