Most of us will have an overdraft option with our current account. We will have the option of borrowing some money if we need to. However, that overdraft could be expensive and we may wonder whether it is worth looking around for a cheaper one. There are advantages and disadvantages of doing this and it is a good idea to think these through before deciding whether to get a cheaper overdraft.
Advantages of a Cheaper Overdraft
If you want to have a cheaper overdraft then switching your current account to a bank that has one will save you money. You could find that there is quite a considerable difference between banks with regards to the amount that you are charged for borrowing. It is important to be aware though, that some will charge for you to have a current account and these may have much cheaper overdrafts. You will need to do some calculations here as to whether it will be cheaper for you to pay that charge and pay less for the overdraft or not. This will depend a lot on how often you use the overdraft. You will find that if you use it a lot then it will be much more worthwhile. If you rarely or never use the overdraft then it is unlikely to be worth paying unless there are any other benefits as well that you feel will make it good value for money.
You may not feel that the cheaper overdraft will make that much of a difference. However, overdraft costs can vary quite a bit. They tend to be between 35% and 40% and that 5% difference could be really significant. If you go overdrawn for a year, borrowing £1,000 for example then that will be a difference of £50 which could buy quite a lot of things. Also, why pay more than you need to?
Disadvantages of Changing Banks
In order to have a cheaper overdraft you will have to change your current account. This means that you will need to move to a new bank and this can be a difficult thing to do. Although the banks are supposed to assist you and automatically swap over your direct debits and standing orders etc, it can still be a tricky thing to do. You will need to think about whether you are willing to go through this effort to save the money.
It is also worth thinking about the fact that the bank may change their interest rate. Overdraft rates are variable which means that they can be changed at any time. There is a possibility that they might go up just after you have switched and you may have been better staying where you were. Of course, this is a risk whenever you borrow money at a variable rate as you could find that you will end up being charged more after a while and you have to decide whether you feel that this risk is worth taking or not.
You may have other products with your bank and you may find it convenient to stay with it. Sometimes you get a better savings interest rate, if you have a current account with the bank as well, for example. It is also good to think about the convenience of being able to transfer money between accounts, which may not be so easy if they are not all held with the same bank. You may be able to do it using online banking, but you should be able to set up a BACS payment or details so that you can still do this fairly easily anyway. So think about whether the small effort in setting these payments up will be worth it considering the money that you will save by switching.
Cash loans are often not talked about that often and this means that people might have a lot of questions about them. It is a really good idea to make sure that you do know a lot about them because you want to be able to decide whether it will be the right sort of loan for you, if you do need to borrow money at any one time. Knowing about all loans if useful so you can make the right match. It is therefore a good idea to make sure that you find out as much as possible about it, then you will be able to decide whether it is the right loan for you. Therefore, learning more now, is very useful.
Who are the Loans for?
Cash loans came about because there were lots of people who needed to borrow money and could not do so because they had a poor credit report. Lenders began to notice this was a problem and so decided to set up a type of loan that would help them. Therefore, they started to lend small amounts of money to people who had a poor credit score and could not borrow money elsewhere. They made the money available quickly, as they realised that it was often needed in emergency situations.
What are the Requirements?
There are still a few requirements which borrowers have to meet in order to use this sort of loan. They have to be an adult so over the age of eighteen and they have to be a UK resident with a UK address for identification purposes. They will also need to have a regular income, but this does not always need to be a salary, but it could be benefits or a pension or something else instead. This means that most people will qualify for this sort of loan as there are not other requirements, unlike many other loans where you will need to pass a credit check in order to get it.
Are They Right for me?
It is worth noting that even if you qualify for this sort of loan, you need to check to make sure that it will be the right decision for you. Whenever you are borrowing there are important steps that you should take first. You need to think hard about whether you really need a loan to start with. All loans will cost money and you will need to think about that cost and whether you think that it is really worth it. If you can go without the loan and either go without the item or save up for it, then this will be a lot cheaper. There will be differences in cost between different loan types and so you need to think about that as well and compare them. It is also important to think about the other features of the loans. Things like how they are repaid, how much you can borrow and what the lender is like are things that it is also important to think about so that you make sure that you get the best loan to suit your needs. Consider what you need for a loan and this will help you to find the right match.
With a cash loan you will find that they are good if you want to borrow an amount up to £1,000 and do not have a good credit record or need the money really quickly. The loans can be arranged very quickly, sometimes within a few hours and this means that you will be able to get the money that you need really quickly so they are good for emergencies.
If you have a poor credit record then you may find that you will have less borrowing options. You may feel that payday loans will be your only answer. However, you may find that you do have alternatives and it is a good idea to think about all of your options so that you can make sure that you take the action that is best for you.
A payday loan will usually be available to everyone which means that even if you have a poor credit record you should be able to use one. You will be able to borrow up to £1,000 although the amount will vary depending on the lender. You will find that you will normally be able to get the money quickly as the lenders tend to assume that borrowers need the money for emergencies and therefore will get the money to them quickly. It could even be available within a few hours. It will need to be repaid quickly though – normally in a lump sum on the next day that the person is paid.
Other Poor Credit Loans
There are some other loans that are specifically designed for people with a poor credit record. It is a good idea to consider these as well as they may be more beneficial. For example, you can get instalment loans, which are similar to payday loans but repaid over a series of months to make the repayments more manageable. There are also guarantor loans which allow you to borrow larger sums of money but you will need to nominate a person as a guarantor who will cover the repayments if you cannot afford them. Check these out in case they suit you better than a payday loan. They may be more expensive though so make sure that you carefully compare the prices too.
You may find that you will still be able to borrow form regular lenders. This will depend on how bad your credit score really is. It can be a good idea to contact lenders and to ask them whether they might consider lending to you. Explain your position and find out before a credit check is done. It is wise to do this because if a lender does do a credit check then this will show up on your credit record. If you are turned down it will put off other potential lenders and if you keep applying to lots of lenders this will also look bad. If you have a good idea of whether you might be accepted or turned down before you apply, then this will be really beneficial for you. You may find though, that if you do get accepted for a loan, you will be charged more than the advertised rate. It is worth bearing this in mind and comparing rates so you do not end up paying more than necessary.
Not Borrowing at all
It is always worth making sure that you really do need to borrow money. There are very few free borrowing opportunities and this means that you will always have costs to pay. You need to work out whether it is really worth paying those costs. Think about what you are borrowing the money for and whether it is worth the cost that you are paying for it. Consider whether you will be able to wait and save up rather than borrowing. Consider whether you have any savings you could use. Even think about whether you need the item at all and whether you might just be better off not buying it at all.
It can be difficult to know whether any sort of loan might be right for you to use. It is well worth always asking whether it will be the right choice for you and trying to compare it with your other options to see whether you feel that it will be something that you should choose. There are a series of things you should be asking yourself.
Is Borrowing the Right Option?
It is a good idea to start by asking yourself whether borrowing money is the right thing for you to do. All borrowing will cost money and will need to be repaid and you need to think about whether it is a good idea for you to be borrowing at this stage. It is worth thinking about what you are using the money for. Is it something that will improve your situation and therefore worth borrowing for or is it an emergency? Both of these reasons can be good ones for borrowing but if you just want a treat or can wait to save up for the item, then it is best to not borrow at all.
Are Payday Loans the Best Loans?
You then need to look at all of the different loan types in order to work out which will offer you the best value for money. You will find that you will be able to think about what you want form a loan and match that up to different loan types to help you to pick the best one for you. Think about what makes a particular loan type unique and then you will be able to think about whether this will suit your needs better than others. With a payday loan, you will find that it has particular features, that you will need to be aware of. Firstly, they will take on borrowers that do not have a good credit record and this means that you will be able to get a loan even if you have had financial problems in the past or cannot provide evidence that you are capable of making regular payments. The loans can be arranged very quickly, sometimes within a few hours and this means that you will be able to get money if you need it in emergencies. You will also find that the amounts that you can borrow will be small – usually up to £1,000 and so they are very useful if you only need little amounts of money.
Can I Afford to Repay?
It is really important to make sure that you are able to repay the loan. Make sure that you find out exactly how much you need to repay and when and then you will be able to work this out. It is wise to carefully look back through your past bank statements to see what else you will have to pay for and whether there will be enough left to pay the loan.
Am I Happy With the Cost?
It is also worth looking at how much the loan will cost. The lender will be able to tell you how much this will be if you ask them. By finding this out you will be able to decide whether you think that it is worth paying that much for the loan or whether you think that it is better to go without the loan. Even in an emergency it is good to be aware of how much the loan will cost because you may have alternative options to compare it with. Also make sure that you compare lenders as they will charge different amounts.