When folks talk about comparing payday loans to bank account overdrafts, an individual can say that bank overdrafts are pretty common. There are a few borrowers who depend on those overdraft facilities, while there are some who see overdraft as their last option. But if one did a deeper analysis, things could be different.
Not many know the difference between both of these financial instruments. To put it simply, payday loans or as known as cash advance loans are short-term loans and can make money for the borrower between wage payments. These payday loans come along with a higher interest rate and the borrower would usually be required to offer a photo identity card and proof of income as supporting documents. As far as an overdraft is concerned, it’s a kind of loan arrangement under which the bank allows or extends the charge to a certain limit against which the client can make withdrawals or draw checks.
In regards to the interest costs of these loaning facilities, there might be a great deal more than what surfaces at the upper level. Many borrowers believe payday loans are costlier but that’s not the case as overdraft facilities are instruments which often cost more in the long term. The charges of an overdrawn account within the long-term will be more than a payday loan.
The borrowers should not worry too much about this as they could avoid overdrafts using payday loans instead. Payday loans will come in handy once the borrower feels that his bank accounts would be vacant or might even go negative. Such scenarios become very taxing, especially if there is a check drawn against the account. These situations can be avoided as a payday advance could offer the necessary funds to the account for approving the check. The borrower may pay the borrowed amount at a later date.
The cost of payday loans isn’t only less than overdraft fees, but they are also an easy method of acquiring personal cash. The account financing through payday loans usually happens in a few hours or in a few days. The application is also simple and can be done online. Faxing or no paperwork required. The issue with overdraft facilities is that the banks not only charge their customers exorbitant fees, but the fees structure is revised regularly and isn’t the same among banks. A borrower should not be shocked if his current overdraft fees exceed his previous month fees.