Overdraft Extensions vs. Loans: Why the Latter Might Be the Better Option for You
Any one of us could find ourselves in a position where we need to borrow money. Although it’s important to try and avoid such an eventuality, even the best-laid plans can go awry. All it takes is one unexpected bill, a reduction in your hours, or bankruptcy, and you could find yourself struggling to meet your repayments.
For those who find themselves in this position, dipping into your overdraft may seem like the best option available to you. As a result, it’s usually the first choice that people turn to. However, unless your financial troubles magically resolve themselves over the course of a couple of weeks, lots of borrowers find that they’ve maxed out their overdraft and still require more capital.
The automatic assumption is that an overdraft extension should be your next port of call. Other forms of borrowing are snubbed, on the basis that they’re inferior with regards to the terms they offer and the service they provide.
This is not always the case. Loans have many factors to recommend them. If it’s time to consider your next step, here are just a few that you ought to know about…
Many of those who become reliant on borrowing need money in their accounts quickly, and this often renders overdraft extensions unsuitable for them. These facilities have to be arranged via your bank, and it’s common for this process to take an insufferably long time. Most people don’t have the luxury of waiting one to two weeks to access the cash they require, which makes loans a much better option. With lenders like Smart-Pig able to transfer money into your account in as little as thirty minutes, they’re often a far more viable choice than the alternative.
Although overdraft extensions often have low interest rates, there are loans that also offer very competitive terms. Rather than assuming that the former will automatically cost less, it’s a much better idea to shop around and see which offers the best deal for you.
Another major boon of loans over overdrafts is the former’s flexibility. The amount that your bank will be willing to extend your overdraft facility to is likely to be limited, especially because the act of maxing out your initial borrowing threshold does not exactly recommend you as a safe lending option. Loan providers are likely to be far more flexible. You’ll have a much greater say over how much you borrow, how exactly you’ll repay it, when the debt must be settled by, and the terms that bind you. This means that you can reach the best possible deal for you, rather than being at the mercy of your bank manager’s whims.
If you’re considering your next step, could a loan provide the ideal option for you?