Are there benefits of an overdraft?

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Background concept wordcloud illustration of loan

Overdraft and payday loans are both useful ways of meeting your short-term finances. However, overdrafts are becoming very useful to customers whose bank balance is lower than it should be. An overdraft allows you to spend more money than you have. This credit agreement helps people have a safe cushion when unexpected financial crises arise.

Understanding payday loans

Payday loans are also seen as a useful option when sudden financial problems arise and you are unable to meet them on your own. Whether it is for car repairs, family emergencies or home renovations that exceeded your budget, these loans provide a bit of flexibility to help you out.

Payday loans versus overdraft

Almost anyone can apply for a payday loan. Compared to any other bank loan, they are much easier to get. On the other hand, although getting the bank to provide an overdraft is not easy as there are many requirements that need to be fulfilled, this facility is far cheaper than payday loans.

Payday loans are easy to apply for and can be sanctioned within a few minutes. Thus they are a source of immediate cash, which is crucial when you are faced with an emergency. For overdrafts, the bank checks your bank balance and your account history. This process may take slightly longer. If the individual is already using the overdraft facility, or if they have consistently overdrawn in the past, the bank will not approve the application.

Make sure you research payday loan lenders before taking a payday loan. The allthelenders website is the best place to start and finish your research. It is the UK’s first price comparison website for the short-term loan industry, and the website is regulated and authorised by the FCA.