Payday Loans vs. Overdrafts: Which one should you choose?

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It can be difficult to pay unexpected bills and not cause financial harm.

You have many options such as overdrafts or payday loans. How do you know which one is right? We’ll tell you in this article which loans in my neighborhood option is right for you. 

What is an overdraft?

An overdraft option is a check account that allows you borrow money from your checking account. If you take out money from your overdraft. The negative amount in your bank account means you have to pay it back. You can use two types of overdrafts.

Arranged: This is an agreed-upon overdraft on your account.

Unarranged Overdraft: This is when you spend more than you earned and you have not agreed with your manager. This could indicate that you are spending more than your overdraft limit.

Understanding the different loan fees

Once you have looked into overdraft, it is time for you to learn about the different fees. You should understand how each bank calculates the overdraft fees and what they will cost you to use it. The APR of both banks and their impact on creditworthiness and your finances will help you choose the best option for your financial situation. However, there are possible changes to the overdraft rules. These are:

  • Your overdraft’s interest rates are now set at one APR.
  • There are no daily fees to use your overdraft
  • The interest rate on an unarranged or arranged interest loan is the same.

Compare the various costs

There are many things to consider when considering the cost of both loans or overdrafts. The APR and lender can make a difference in the amount you pay. The APR will affect the monthly repayment amount. However, the amount that you borrow can have a major impact on your finances as well as other elements. If you do a thorough assessment and manage your finances properly, you can resolve unexpected bills and repairs without worrying about how they will affect your finances in the long-term.

With this in mind there are many options available to pay off any unexpected bills or loans while also maintaining your finances. Which are you going to use with a cash advance or a payday lender?

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