Payday loans are bad credit loans because of high rate of interest for a very short period of time. There is various other credit option available in the market when it comes to loans, thus try consulting a credit company for all the type of loans available. Get in touch with your family and friends for financial help when you are going through a financial crisis. There are loans such as overdrafts which can be considered as another option in the time of emergency. Are these overdrafts more expensive than payday loans?
Shortcomings Of Payday Loans
The shortcoming of payday loans is that they have a very high rate of interest and are to be paid back in a short period of time. A person with low credit may get stuck in a financial debt trap if he avails the option of payday loans. To avoid the financial crunch for that particular period of time one has to face many more financial crunch in future. Which any sane person would want to avoid but the circumstances are such that they have to undergo it. So should overdrafts be considered?
What Is An Overdraft?
Overdraft is basically an extension from the credit institution when your bank balance reaches nil. You pay an additional charge on what ever the amount is credited to you according to the time period. It sounds very promising procedure free from any other additional formalities and comprehensive application work. But the question is whether the overdrafts are worthy and useful in future, or do they leave a negative impact on your bank statement and cash flow? An important thing to consider is how they fare along with the payday loans.
Pros Of An Overdraft
The only advantage of an overdraft is that the procedure of getting an overdraft is less cumbersome and there is no comprehensive paperwork. The credit company or the banking institutions already know you and your cash flow. They have a detailed background of how a person is and all the necessary details about you. So the procedure does not requires any further paperwork and takes comparatively less time when compared to other loans.
Cons Of An Overdraft
The cons of an overdraft are that if you do not have a good financial history with the bank you might not be eligible for an overdraft. If you have a good bank statement and cash flow, the bank or the credit institution agrees to grant a loan. Also the rate of interest charged on the overdraft is very high and even more than that charged on the payday loans and it keeps on adding to the principal amount according to the time period. The delay caused by you in repaying the loan, the more it gets added to the original amount. Also the additional charges which are taken have no proper terms and condition.
Once your account is credited with your payday the loan credited by the bank as an overdraft with the additional fee automatically is deducted from your bank which might cause problems for you in the future. You do not have a record except the bank statements and this might not be accountable. Your future planning or present planning are disrupted. The set budget and expenditure pattern is disturbed.
The Bottom Line
Thus an overdraft is also not the sole solution to financial crunch just like the payday loans. Both might have their advantages but when weighed with disadvantages they both are at a loss. The disadvantages in both the cases outweigh the advantages and are a sign of financial problems. One might need to re think when choosing overdrafts or payday loans and consider other options.
Since loans and such matters concerns your hard earned money and your efforts one should choose wisely. It is also important to note that the payday loans are just like your personal loans but with a very high rate of interest. Decisions should be taken calmly after consulting all the trusted people that includes your family and friends. Proper financial consult should be taken from a professional. All the options should be explored before making a financial decision.
In addition to this, the terms and conditions and every negotiable detail should be stressed upon very carefully because in future these things cause deep trouble to the customer. And since these are law abiding one has no option but to cave in because the court expects that you might have read and understood all the details very carefully and the baking institutions cannot be held liable for your actions.