New research has shown that many high street banks are charging a lot more for unauthorized overdrafts on accounts than the interest charged by payday loan providers. Payday loan providers are regulated by the FCA, and in many cases they work out a lot cheaper than dipping into an unauthorized overdraft given by a bank account provider.
What Is a Payday Loan?
Payday loans are instant forms of borrowing money. They are suitable even for people with bad credit, and people can apply for a loan and find out instantly whether they’ve been accepted or not. There are normally no fees to pay with payday loans, only the interest charged.
Payday loans have received quite a lot of bad press due to the high interest rates they charge those who borrow from them, but reputable companies tell the lenders exactly how much interest they will pay on money borrowed for a specific amount of time so the borrower is always given all the information required to make the decision before they take out the loan. With the new shocking statistics from Which? about the amount of money that banks are charging, it seems as though payday loan providers are going to become a lot more popular with consumers.
Which? have conducted research into the amounts paid by people when they use an unauthorised overdraft facility provided by a bank. They found that people who borrowed as little as £100 could be charged up to £180 by their bank for using the overdraft, compared to the £24 that payday lenders are capped by the FCA. This is a huge £156 difference in charges, and with this research it’s not hard to see why payday lenders are becoming more and more popular. This amount of money is substantial, and it goes a long way to explain why people are struggling so hugely if they use an unauthorized overdraft facility provided by their bank.
Which Banks are the Most Expensive?
Throughout the study, Which? determined that the most expensive bank in relation to charges for £100 borrowed for 30 days was Natwest – their fee was £180. The second most expensive lenders were Lloyd, TSB and Santander who charged £160. Which? approached these institutions for comment, and they were told that while the charges were high, they did offer their customers many ways to manage their money more effectively and that they encouraged their customers to get in touch with them as soon as possible if they were going to struggle financially. However, these comments do nothing to explain why the fees they charge are so ludicrously high.
Many people find that they are unable to get overdraft authorizations from their banks, which is why they often end up dipping into an unauthorized overdraft and get charged such high fees for doing so. As payday loan providers are willing to take people even if they have bad credit history and they have proved that their charges are much lower than many major banks, the most logical option for people to look into seems to be when they are searching for something to help tide them over financially.
If you are looking for short term financial help, then compare the rates provided by a reputable payday loan provider. You’ll often be amazed at how much cheaper it can work out when compared to banks or other loan companies, and if you ensure that you choose a company with a good reputation then you’ve got nothing to worry about at all. FCA regulations mean that these companies are the future of borrowing money on a short term basis.