Payday Loans vs. Bank Overdrafts

Are payday loans cheaper than overdrafts? In some cases, yes they are. Research by Which? In June 2016, the consumer group, found borrowing cash on an unarranged overdraft can be up to 12.5 times more expensive than if you were to take out a payday loan.

If you borrow £100 from a payday lender for 28 days, you would have a maximum interest charge of £22.40 as a result of a cap brought in by the Financial Conduct Authority. If you went overdrawn without agreement from your bank, however, you could pay as much as £84, based on Barclays or Santander bank account overdraft fees, £3 per day on 11/04/18, after going over the buffer limit. So taking out a payday loan could be a lot cheaper than an unarranged overdraft.