Which is better for short term cash flow problems – an overdraft or a payday loan?

So, it is the end of the month and the bills are coming in, you need to get some groceries, the electric bill is due, and you are running out of petrol at an alarming rate.

You look at the balance in your checking account and low and behold, there is not enough money to pay all your expenses. It is possible to pay the electric bill at a later stage, but it will end up costing extra on late charges.
We all know that is not possible to go without food or petrol, but luckily there are options.

Many people will go into overdraft on their check accounts and others will get a payday loan to make ends meet until they get their next paycheck. The question here is, how do you know which option will work better for you?
Overdraft fees appear when you spend more money than you actually have in your account.

There are a number of reasons why this can happen such as; you could have lost track of how much you actually spent or maybe a check cleared before you thought it would. At the end of the day, you will be charged overdraft fees for overspending.
If you have a checking account, it is advisable that you get overdraft protection for the times when you accidentally spend more money than you should have. Try to remember to do this when you sign up for the checking account with an overdraft facility.  This is the best way to avoid being charged the overdraft fee. There is normally still a fee charged when you get this type of credit.
You could consider having your check account linked to your savings account and then you will use your own funds to cover the expenses. Make sure with your bank that this option is available and how much will be taken off the savings account money.
Payday loans give you the chance to take out a certain amount of money. It is then paid in either cash or as a deposit into your checking account, which you can then use to pay your bills and get some of those necessary groceries and petrol to get to work. There is normally a fee charged for borrowing the money and it will be added to the amount that you have to pay back.
Charges are also based on the amount of time it takes you pay the money back. The longer it takes, the more you will be charged. These charges are normally a percentage of the total amount you requested. This can be very cost effective if can you figure exactly how much you need, borrow it and pay it back straight away. It just makes sense to pay the money back quickly and avoid more charges.
Getting a payday loan can save you money; if you are able to take out all of the money you need at one time and then pay it back quickly. There are fees that you will need to pay, but you can keep them to a minimum if you pay the amount back soon after borrowing it. With an overdraft, you are charged fees every time you make a purchase on your account.
Each individual and family is different, so look at the current fees at your bank versus online loans or payday loans to see which is best.

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