Is an online loan from right for me?

Representative Example

Total amount of credit £80, duration of the agreement 29 days, rate of interest 292% per annum (fixed), total amount payable (in one repayment) £98.56. Representative 1281.8% APR.

Asking whether any form of credit is right for you is an excellent place to start.

Our payday loans have been designed to provide a remedy for your emergency money needs. These type of loans should not be used for sustained borrowing over longer periods, nor if you are in financial difficulties. The charges for our loans are higher than other types of loans, such as a car loan which are payable over a longer period, so if you do need a longer-term solution then you should look elsewhere. However, it may be a cost-effective alternative to an unauthorised overdraft.

The different types of credit available can be overwhelming. A good way to break this down might be to analyse the reason behind your need for finance. Is it to buy a house or a car? Is it cover an emergency bill?

A loan falls into the latter category and has been designed to help you smooth over any cash flow emergencies until your next payday. A similar type of loan that you may consider is known as an overdraft. Let's explore the two and compare and contrast their features:

Payday Loans

Payday loans are small sum, short-term loans designed for times when you need to cover a cash shortfall. Subject to affordability and eligibility checks the amount that you can receive is typically less than a £1000. You can apply for a payday loan online and in store. Some firms like us are only available online. Some of the benefits of payday loans include flexible loan amounts and daily interest charges meaning that you only pay interest for the period you have drawn down funds. However, payday loans typically have higher interest rates than, for example, a loan secured on your car so be sure to keep this in mind if you decide to apply.


When your bank account runs out of funds but you continue withdrawing money or paying with your debit card, it means that your account is overdrawn and the money that you are using is effectively a loan from the bank. An overdraft comes in two forms; an authorised version and a non-authorised version. The former will have been agreed in advance with you. The latter, by definition, will not. If you go into overdraft without authorisation from your bank, you can incur hefty fees. If you opt to get your account authorised to be overdrawn, you are often subjected to a credit checking process.

Make sure that a 247Moneybox loan is the right choice

Which is better?

While both of these options are meant to address the same issue and can be beneficial, it's important to do thorough research because they also have their criticisms. As stated before, both payday loans and overdrafts are viable options to help get you out of a cash-flow emergency quickly. But which is best? Unfortunately, there's no cut and dried answer. Whether you should choose a payday loan or dip into your overdraft depends on numerous factors but make sure you analyse your situation carefully before making a borrowing decision and check any repayments are affordable.

When comparing financial products, the APR can be a useful measure. However, when it comes to payday loans and overdrafts it can be misleading to say the least. Check out our great article on APR and when it can be helpful and when it can fall short. What is important to note however, is that payday lenders and indeed all personal loan providers must display the APR in any of their financial promotions if certain trigger events are met. Banks offering overdrafts do not have to show this figure which is a little odd we think you will agree.

When comparing the cost of borrowing via a payday loan and an overdraft do bear in mind that with a payday loan you can never repay more than double what you borrowed in the first place. There is no cap for an overdraft, unauthorised or not.

So, which one shall I choose?

That really is up to you but hopefully we have provided some information to help you make that decision. Remember though, that both options are for the short-term. You need to make sure that you can afford to repay both a payday loan and an overdraft. Many assume an overdraft is not really a loan but technically it can be recalled by the bank at any time. The phrase that you will often see in the terms and conditions of an overdraft is "on demand". This means that at any time the bank can ask you to repay it and begin collections proceedings if you can't.

At the end of the day, whether you take out a payday loan or allow your account to go into an overdraft, you will be faced with paying for your borrowing. This amount can vary greatly, but the reality is that you will need to pay a fee for using money that originates from a regulated credit provider. Both options are designed for the short-term and, if used responsibly, can be of assistance.