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Bank Account Charges May Be More Expensive Than A Payday Loan

by Jim ONeil on December 15, 2010

in Payday Loans News

Through its research, MoneySavingExpert.com found that some bank accounts charge unauthorized overdraft fees that are higher than using a payday loan to borrow the equivalent amount of money. This is surprising, considering that payday loans are known for their high interest rates. For some, payday loans may actually be a more cost-effective alternative.

In its report, the organization found a lending bank that charged £150 for exceeding an overdraft limit by £400 for four days. Some payday lenders charge only £15 in interest to borrow £400 for four days. However, it is important to note that the first is an unauthorized type of borrowing, while the second is arranged, which results in the higher fee making more sense.

Regardless, individuals who regularly exceed their bank overdraft limit can face financial issues. The overdraft charges may sometimes be difficult to pay back. A Think Money bank account expert recommends that individuals who have had problems with bank charges consider a managed bank account. Money for essentials like bills is kept separate from spending cash, reducing the probability of incurring bank charges.

This type of account may be the solution for some people, but it is not likely to be sufficient for people who are experiencing major financial difficulties. If a person is unable to manage financial commitments, a debt advice expert should be retained. This professional will help the individual develop a plan to get back on track financially.

A payday loan may be the ideal situation for a person who faces some short-term cash flow issues. Loans that include low interest rates may be much more affordable than paying bank overdraft charges. Consumers should compare the two options and select the one that has the most favorable terms. Setting up a managed bank account may be another way to better maintain the finances.

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