Are Payday Loans Cheaper than Unarranged Overdrafts?

5 Minutes Read

If you are in need of a short-term solution to financial worries there are often only a few possible options open to you. If you are unable to borrow money from family members and loved ones to help you get through this tough period, the other options are to take out a payday loan or go over your current account limit with your bank and have an unarranged overdraft.

PiggyBank understands that there is often scepticism around the payday loan market, but when you compare our service to that of an unarranged overdraft it can quickly become apparent that it might be better to utilise a short-term loan rather than delve into your overdraft unannounced.

Unarranged Overdrafts

A study by Which? in 2016 found that for many high street banks, the charges relating to a person using their overdraft facility without prior agreement with the bank can cost up to as much as £90 over the course of a month. This charge is based on borrowing £100 within this time frame. This is due to the banks stating that it should always be a last resort, with other forms of borrowing available via their facilities, and at a cheaper rate. For many people, though, these are not viable options as they would not qualify for assistance.

It can be difficult to work out exactly how much it will cost you if you end up using your overdraft without an agreement with the bank, but the survey found that the charges range from £20 to £90 depending on who you bank with. Compare this to the associated charges on a payday loan over the same period o and you can see why many people choose to look for assistance from a payday loan lender.

One thing is for sure, having no cap on the charges leads to wildly differing rates depending on your bank, and although many now have a text message alert system to warn their customers when they are overdrawn, and how long they have to prevent a charge, this isn’t always enough to stop an individual stacking up bank charges.

Payday Loan Agreements

Every payday loan provider is different but we certainly know that at PiggyBank, a £100 payday loan, with a repayment period of one month offers a much better payback term than an unarranged overdraft with your high street bank. The interest you’ll pay on top of the £100 you borrowed is just £24.

We’ve made it as easy as possible to see exactly what you have to repay us, including interest, so there are no hidden costs with PiggyBank. Our interest comes to 0.80% per day, meaning we are one of the most cost- effective payday loan lenders on the market. Our service is a short-term fix and we would never advise that you use our service as a long-term financial solution, as that it where the interest rate can cause greater problems for the individual.

PiggyBank offers a simple solution to your short-term financial needs. Our application process takes minutes to complete and is 100% online. All we need from you to get started is a few personal details, your income and expenditure, employment information and bank account details. You can choose to take out a payday loan with us from £100 up to £1000, repaying anywhere between 7 days up to 5 months.

If approved we aim to have your loan direct into your bank account within an hour. You’ll be given access to an online account with us, where you’re given multiple repayment options, including part payment. We want to make it as simple as possible, so you can save interest by repaying the loan early and only paying for those days you’ve had the loan, part payments throughout the duration of the repayment term will also reduce the interest and a payment plan is an option to spread the cost.

Taking out a payday loan with PiggyBank is a sensible option for those seeking short-term financial assistance. Compared to unarranged bank overdrafts it is a no-brainer to utilise the experience of a payday loan lender with no hidden costs.