Bank Overdrafts vs Payday Loans
When one is in desperate need for cash in a jiffy, there are now options, especially for those people who have their backs against the wall. Those people who have their backs against the wall are those who have bad credit history or have no time to wait for the long application process before the money arrives at their hand. One other thing could be that they are not willing to risk making collaterals of their assets. That is why there are now certain companies that have been taking advantage, I mean have recognized that niche market. Those are the payday lending companies.
Since the payday lending companies have opened up, some have called them to be opportunistic people who have been taking advantage of the less fortunate people. Those who own payday lending companies say they are only helping out. Because payday lending companies have been a major competition to some banks they have been considered as loan sharks or shylocks. Maybe some of them are, but we should still also look at the good points of them as well. Because of the payday lending companies taking customers from the banks, the banks have devised their own way called “overdrafts”.
Overdrafts are banks way to allow its clients to overdraw their checking accounts even though they have low balance. This overdraft allows the banks to bend their credit laws and collect lots of money from the overdraft fees. The banks only claim that these overdraft fees are actually a service for their customers, but it’s more like a bad deal as well.
The worst part about this overdraft is that they have a very high annual percentage rate of 1000% or higher. The interest rate seems like a massacre of sorts for your wallet. Overdrafts also require the client to immediately make your bank balance positive within days, unlike revolving credit which allows the client to repay loans at their convenience. The overdraft will also only allow you to get $100 to $300. Talk about scrounges. After you have consumed you overdraft money, the checks will start to bounce again like ping pong balls.
When you compare them to payday loans, which also have high interest rates, the upfront fees for overdraft are higher. Overdraft of banks has fees as high as $35 compared to $15 to $20 on payday loan fees. Overdrafts of banks also work automatically with checks and debit cards, so clients won’t know they have overdrawn unless notified by the bank. Unlike payday loans which only charges regulated fees.
It is important to always look at both loans, just try to look at what kind of loan will benefit you most. Always remember to choose the lesser of the two evils.
[Tags]Bad Credit, Debt, Bankruptcy, Payday Loans, Credit Repair, Money Lenders, Credit Cards, budget, Unpaid Debts, Credit Reports, Payday Loan[/Tags]