Here in the UK there's been a recent proliferation of companies offering easy short term loans. These are frequently advertised as pay-day loans. The ads are full of slick young things sitting relaxed in the comfort of their smart homes checking out the loans on their brand new laptop computers.
In the advertising they push the fact you can get a 10 minute response if you apply online and the money's in your account the same day.
They bait the hook with a 10% discount if you include a discount code when you apply. Wow. That's a full 10% discount off the APR. What they don't push quite so openly are the interest rates charged on the loan. The rates are astronomical.
Some of the interest rates on offer for payday loans:
QuickQuid charges 359% per annum
Wonga charges 360% per annum
Paydayuk charges 348% per annum
What bargains. And you can get 10% off. Great. Sign me up.
Here are some of the big UK banks and their overdraft charges:
Barclays charges 19% per annum
Lloydstsb charges 24% per annum
Nationwide charges 19% per annum
Lets take a look at the cost of borrowing £400 for 30 days:
QuickQuid charge £117.70
Wonga charge £118.356
Paydayuk charge £114.41
Now the banks overdraft charges on £400 for 30 days:
Barclays charge £6.25
Lloydstsb charge £7.89
Nationwide charge £6.25
The banks may levy a charge for setting up the overdraft.
Bear in mind that banks are NOT cheap. Banks exist to fleece you of your money and let you think they are doing you a favour.