Exceeding your overdraft limit will often result in a small charge from your bank and see your credit rating take a hit. For most lenders this would result in automatic rejection if you were to apply for a loan, certainly in the short-term at least. However, this isn’t the case with payday loans.

This type of short-term borrowing is purposely designed to help those who are most in need of cash – including anybody who has slipped into the red temporarily. Without the usual dependence on credit checks, obtaining a payday loan is remarkably straightforward, regardless of your current predicament.

So why can payday loan companies be so lenient?

Well, there is a certain risk pay-off that occurs between the lender and borrower. The loan companies are able to take on riskier borrowers simply because they charge a higher rate of interest. Using salary as a guarantee, they don’t need to be overly concerned about your ability to repay beyond the agreed date.

On the flipside, the customer will have the opportunity to get their hands on money at a time when it’s needed most and alternatives are impossible to come by. Whilst there is a clear cost issue, this is often outweighed by the possible savings, particularly if you are missing direct debits or likely to be overdrawn if you don’t have funds available.

The ramifications of being overdrawn or missing vital payments can be severe and far reaching. Bank charges can really mount up. Whilst some charge a one-off administrative fee others prefer to implement a daily charge for every day that you’re overdrawn. Plus, if you were to then fail to have funds for other direct debits, such as utility bills, loan repayments or even your mortgage, this would see you chalking up further charges and getting deeper into debt.

As well as being financially damaging, this is also bad news for your credit rating. These kinds of black marks on your history can take years to be removed. This can make borrowing difficult and also result in higher rates of interest being charged – due to your increased risk rating.

That might seem a little unfair, and there would certainly be plenty of people who would agree, but like so many financial services, banks and lenders have to weigh up risks using all available data. So just like if you make a claim on your insurance, which then results in a massive increase in annual premiums, damage to your credit rating can really hit you in the pocket.

Therefore it is often advised to do whatever you can to prevent or, at the very least, reduce this wherever possible. This is just one of the reasons that some people choose to turn to payday loans to get their finances back in check.

As previously alluded to, the restrictions on short-term borrowing are far more relaxed. As such you are far less likely to be rejected on the basis of having gone over your allocated overdraft. Lenders are far more interested in your monthly wage and whether you are in a position to repay on time, therefore credit checks and related financial scrutiny tend to be a little more relaxed. The higher rate of interest provides the lender with adequate protection, which means that they can help a broader cross-section of society; including those who would struggle to get finance elsewhere.

So if you have exceeded your overdraft, don’t panic. There are options available to you to help get you back on your feet, including payday loans. Prevention is always better than cure in these cases, but it’s important to know that solutions are available – even in what can appear to be the most dire situations.

Vincent Rogers is a finance writer who writes for a number of finance businesses. For reliable payday loans, he recommends http://Paydaypower.co.uk

Vincent Rogers is a finance writer who writes for a number of finance businesses. For reliable payday loans, he recommends http://Paydaypower.co.uk

Author Bio: Vincent Rogers is a finance writer who writes for a number of finance businesses. For reliable payday loans, he recommends http://Paydaypower.co.uk

Category: Finances
Keywords: payday loans, same day loans, loans, UK, finacne