Loan or overdraft
An arranged overdraft used for a few days is often the cheapest way to bridge a genuine gap. An unarranged one is among the most expensive, and an overdraft that never clears is a permanent cost most people never notice.
Interest on an overdraft is charged on what you use, for the days you use it. For a three-day gap before payday, that is a small amount and less than a loan’s initiation fee.
Unarranged use — going over without an agreed facility — attracts substantially higher charges and shows on your statements. A lender assessing you reads recurring unarranged overdraft as financial strain, regardless of your credit record.
The real trap is the overdraft that never returns to zero. Because there is no schedule forcing repayment, a facility used once can become a permanent reduction in your balance, quietly costing interest every month for years.
For a defined cost you will repay over months, a loan is usually better precisely because it ends. For a few days before payday, the arranged overdraft usually wins.
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Sources and last checked
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Page last checked 10 August 2026. Statutory caps and lender terms change — confirm anything you intend to rely on with the provider or the National Credit Regulator. Found something wrong? Tell us and we will correct it.