Aldgate, London, United Kingdom; 24, September 2016: Payday loans offer consumers a real way to cover short-term expenses. They aren't designed to be long-term financial products. Overdrafts, on the other hand, are much like credit cards in that one can have a rolling balance. As a result, fees like interest charges can significantly increase.
Some people believe that overdrafts are cheaper than payday loans. But one company, Very Merry Loans, reveals how the reverse is true.
The ugly truth that banks don't want consumers to know
Banks are often quick to criticise companies that offer short-term lending. They feel that such companies take advantage of consumers and believe overdrafts provide better value for money for short-term credit. The ugly truth is far removed from reality; it would seem.
One major High Street bank charges 75 pence per day on overdrafts of up to £1,000. Based on that fact, Very Merry Loans made a comparison against their short-term loan options. Using figures from verymerryloans.com, one can consider the following scenario:
* A consumer needs to borrow £100 and wishes to pay it back over 90 days;
* With the bank charging 75p/day, the overdraft fee equates to £67.50;
* A short-term loan option with Very Merry Loans only costs £40.48 in comparison, just under 45p/day.
It's a comparison one can make between many High Street banks and payday loan lenders. So, why aren't more people aware of that fact? Sadly, some financial institutions try to demonise the payday loan industry. The truth is, industry statistics show that it's a more viable alternative for consumers.
There are many reasons why people need to borrow small amounts of cash. For example, they might have an unexpected bill to cover such as a car repair. Or they may need to raise funds to pay for higher than expected school-related fees.
In those cases, it makes no sense to apply for a loan of £5,000 or more from a conventional bank. Especially if the applicant can pay off the borrowed amount in just three to twelve months.
Despite what the banks might say, the majority of borrowers repay their payday loans in full. And they often do so before the due date for payment.
Why are the banks keeping quiet about their overdraft fees?
In a nutshell, banks have a lot to gain from customers that use their overdrafts. Overdrafts don't have a repayment date, unlike payday loans.
That means consumers could easily forget to repay the money borrowed. For instance, if a current account was -£100 in their overdraft, the cost could equate to £273 for 12 months! Again, a payday loan would cost less. Options with Very Merry Loans, a £100 loan for 12 months would be just £161.92 in interest.
About Very Merry Loans:
Very Merry Loans is a broker of short-term loans. Customers can borrow up to £1,000 from three to twelve months. Their innovative website makes it easy to calculate fees and apply for loans.