What’s the Difference in Fees Between a Payday Loan and an Unarranged Overdraft?

It was announced last year that unacceptable fees related to unarranged overdrafts are to be scrapped in the UK, and it is with good reason. Many people have suffered financially as a result of unexpected fees and charges related to going into an unarranged overdraft and at times when you are facing a short-term financial problem that requires immediate attention, the last thing you want is for your actions used to resolve that problem taken as a way to compound the situation and add more financial pressure on to you in the mid to long-term.

If you are facing a problem that requires immediate attention, such as an unexpected repair required on your car, or a broken down appliance at home, or a bill much larger than you were expecting, it can be difficult to work out the best course of action. This is especially harder to fathom if you know that your next payday will cover the costs, but that is still a few days, or even weeks away, so what are your options?

Many people can call on the help of close family members and friends, but this isn’t always practical, and the traditional method of going to your bank to ask for help in the form of a short-term loan just isn’t achievable these days, as the high street banks have tightened up on loans altogether. You could however choose to dip into your overdraft, but there is the risk that you will see fees and charges related to an unarranged overdraft, even if you only go into it for a very short period of time.

When it comes to dipping into your current account overdraft unarranged, banks do stick on high interest rates and high fees traditionally to scare off customers from going over the amounts. It could be that you face a fee of £90 for borrowing as little as £100 through an unarranged overdraft. It is much more preferable to know exactly what you are dealing with from the outset, with some banks charging a flat fee, and others charging a daily fee, or daily interest that can cause long-term financial problems if not addressed quickly. When you are borrowing money to fix a short-term financial problem, dipping into an unarranged overdraft may just compound the issue.

The alternative is to seek out a responsible lender, a service where a short-term loan in the form of a payday loan or instalment loan allows you to access the cash you need, with a fast turnaround between application and receiving the funds direct into your bank account. With the modern day payday loan service you will be able to clearly see exactly how much you are due to pay back, with clear payment dates, interest amounts and fees added on to the amount you intend to borrow. This is all finalised and clear before an application is processed, so you’ll never be hit with hidden charges and unexpected fees if you choose to borrow from a modern, reputable and responsible payday loan lender.

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