Installment Loans News Break: Is your overdraft on overdrive?

Has the sputtering economy put you in a situation where you’re constantly using bank overdraft protection every month to pay bills? If so, we’d like to hear your story. Please contact reporter Rita Savard at (978) 970-4826, or e-mail rsavard@lowellsun.com

Quoted With Edits From: Is your overdraft on overdrive? (Lowell Sun)

Make a budget and stick with it

It will always be true that the best way to avoid overdraft fees is to make a budget and stick to it. There’s no method that is more foolproof. However, if you do come across a situation where your account is in a dangerous place, you need to consider your options. Short term installment loans are among them.

What will you do?

There are many different ways of looking at this conundrum. What’s sure is that your account balance is about to dip into the red and you need to do something about it. Not only to protect your reputation as a consumer who pays their debts, but to keep little errors like this from taking root like weeds in your credit report. You don’t want to have a black mark on your report when you go to apply for something big, like a mortgage or a car loan, right? Installment loans do not typically require credit checks, so you wouldn’t have that problem there.

Proponents of overdraft protection (typically banks themselves, or those who are directly or indirectly supported by bank funding) will tell you that having such a service tied to your checking account is invaluable. However, much evidence exists that shows how wildly expensive that ends up being on an annual basis.

And that’s just the beginning…

Economists Donald Morgan and Michael Strain prepared a report for the Federal Reserve Bank of New York that pointed out the sky-high danger of relying on overdraft protection. On page six of PDF of their report, they site a study by the Woodstock Institute of overdraft protection. Studies of eight “large Chicago banks estimated that the (implicit) APR for bounced check “protection” averaged 2,400 percent.”

That’s serious financial bloodletting. Wouldn’t you rather use an emergency options like installment loans, where you pay a reasonable percentage rate (typically no larger than 35-40 percent) and even have the option of a convenient installment plan. That’s MUCH less expensive that a 2,400 percent APR, isn’t it?