{"id":645,"date":"2024-05-26T13:35:56","date_gmt":"2024-05-26T13:35:56","guid":{"rendered":"https:\/\/www.drafty.co.uk\/blog\/?p=645"},"modified":"2024-05-27T08:07:17","modified_gmt":"2024-05-27T08:07:17","slug":"payday-loans-vs-line-of-credit","status":"publish","type":"post","link":"https:\/\/www.drafty.co.uk\/blog\/payday-loans-vs-line-of-credit\/","title":{"rendered":"Payday loans vs Line of credit \u2013 which is better?"},"content":{"rendered":"\n<p>Have you ever had an unexpected expense crop up far away from payday? Many of us have experienced this stress, which is why we sometimes need a cash boost to tide us over. But, with so many different products available on the market, it\u2019s often hard to decipher which one is right for us.<\/p>\n\n\n\n<p>Before committing to a certain product, you want to know all you can and ensure it offers what you need. Drafty understands the confusion around the meaning of a line of credit and an online <strong><a href=\"https:\/\/www.drafty.co.uk\/\" target=\"_blank\" rel=\"noreferrer noopener\">payday loan<\/a><\/strong>, so we\u2019re here to explain the pros and cons in a simple, factual manner.<\/p>\n\n\n\n<p>This blog will detail the similarities, differences, requirements and implications of a line of credit and a payday loan.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.drafty.co.uk\/blog\/payday-loans-vs-line-of-credit\/#what_is_a_line_of_credit\" >What is a line of credit?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.drafty.co.uk\/blog\/payday-loans-vs-line-of-credit\/#what_is_a_payday_loan\" >What is a payday loan?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.drafty.co.uk\/blog\/payday-loans-vs-line-of-credit\/#similarities_of_a_line_of_credit_and_a_payday_loan\" >Similarities of a line of credit and a payday loan<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.drafty.co.uk\/blog\/payday-loans-vs-line-of-credit\/#both_are_short-term_lending_options\" >Both are short-term lending options<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.drafty.co.uk\/blog\/payday-loans-vs-line-of-credit\/#both_funds_are_transferred_to_your_bank\" >Both funds are transferred to your bank<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.drafty.co.uk\/blog\/payday-loans-vs-line-of-credit\/#both_can_help_your_credit_score_%e2%80%93_if_you_meet_your_repayments\" >Both can help your credit score \u2013 if you meet your repayments<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.drafty.co.uk\/blog\/payday-loans-vs-line-of-credit\/#differences_between_a_line_of_credit_and_a_payday_loan\" >Differences between a line of credit and a payday loan<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.drafty.co.uk\/blog\/payday-loans-vs-line-of-credit\/#a_line_of_credit_allows_you_to_borrow_more\" >A line of credit allows you to borrow more<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/www.drafty.co.uk\/blog\/payday-loans-vs-line-of-credit\/#a_line_of_credit_has_a_spending_cap\" >A line of credit has a spending cap<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/www.drafty.co.uk\/blog\/payday-loans-vs-line-of-credit\/#interest_rates\" >Interest rates<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/www.drafty.co.uk\/blog\/payday-loans-vs-line-of-credit\/#is_a_drafty_line_of_credit_right_for_you\" >Is a Drafty line of credit right for you?<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"what_is_a_line_of_credit\"><\/span><strong>What is a line of credit?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>But what does getting a line of credit mean? We think of a credit line as an alternative to an overdraft, <strong><a href=\"https:\/\/www.drafty.co.uk\/loans\/credit-cards-for-bad-credit\/\" target=\"_blank\" rel=\"noreferrer noopener\">credit cards for bad credit<\/a><\/strong> or loans. It\u2019s like a pot of cash you can reuse as much as you need \u2013 when you need it. And, if you\u2019re not using it, you won&#8217;t have to pay a thing!<\/p>\n\n\n\n<p>Drafty offers a line of credit. If approved, you can <a href=\"https:\/\/www.drafty.co.uk\/loans\/3000-loans\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>borrow up to \u00a33,000<\/strong><\/a> and then repay it monthly. As long as you repay the minimum monthly amount, you can choose how long you want to borrow for. And if you don&#8217;t draw any of the money, you don&#8217;t pay anything. Representative 96.2% APR (variable).<\/p>\n\n\n\n<p>What\u2019s more, you can repay a little extra whenever you like and you\u2019ll save on interest. You can draw funds from your credit limit again and again without needing to reapply too.<\/p>\n\n\n\n<p>Credit lines like Drafty offer a fresh perspective, helping you boost your finances while staying in control.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"what_is_a_payday_loan\"><\/span><strong>What is a payday loan?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Simply put, small payday loans are <a href=\"https:\/\/www.drafty.co.uk\/loans\/short-term-loans\/\" data-type=\"URL\" data-id=\"https:\/\/www.drafty.co.uk\/loans\/short-term-loans\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>short term loans<\/strong><\/a> designed to help people bridge the gap until they next get paid. The agreed amount you borrow gets paid into your bank account and you repay it in full, plus interest, at the end of the month.<\/p>\n\n\n\n<p>Direct payday loans are typically only available for small periods, perhaps only up to a few months. However, the costs are high during that period, potentially leaving you with some large repayments at the end of the month. People often turn to instant payday loans as they offer money quickly to those in need. However, this comes at a cost.<\/p>\n\n\n\n<p>Interest is often fixed for online payday loans because they\u2019re designed to be repaid in full at the end of the month, so there\u2019s no need for variables. &nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"similarities_of_a_line_of_credit_and_a_payday_loan\"><\/span><strong>Similarities of a line of credit and a payday loan<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"both_are_short-term_lending_options\"><\/span><strong>Both are short-term lending options<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A line of credit agreement and a payday loan are both designed to be used in the short term. People often turn to these lending options as they offer money quickly. Perhaps you\u2019re dealing with a broken boiler or need a new fridge \u2013 whatever it is, both options will cover these short-term costs. However, a line of credit could be used for a longer period than a loan, but it&#8217;s not a long-term financial solution.<\/p>\n\n\n\n<p>Interest rates are variable depending on your choice. More often than not, though, a shorter borrowing period means a higher interest rate. So, it\u2019s worth exploring your options before you jump in.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"both_funds_are_transferred_to_your_bank\"><\/span><strong>Both funds are transferred to your bank<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If you need help with making a payment, a <strong><a href=\"https:\/\/www.drafty.co.uk\/credit-line\/\" target=\"_blank\" rel=\"noreferrer noopener\">line of credit<\/a><\/strong> and a payday loan from a direct lender will help you cover the costs. Both transfer money to your bank account, ensuring you can foot the bill for any unexpected costs.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"both_can_help_your_credit_score_%e2%80%93_if_you_meet_your_repayments\"><\/span><strong>Both can help your credit score \u2013 if you meet your repayments<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>If you use your line of credit or payday loan responsibly and you make your repayments on time, you could boost your credit score. Future lenders might see you as financially responsible if you pay the money back on time and don\u2019t take out credit too frequently.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"differences_between_a_line_of_credit_and_a_payday_loan\"><\/span><strong>Differences between a line of credit and a payday loan<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"a_line_of_credit_allows_you_to_borrow_more\"><\/span><strong>A line of credit allows you to borrow more<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As the name suggests, an instant payday loan is designed to cover smaller costs until you next get paid. And while a line of credit is still a viable short-term option, you could get access to more money and enjoy greater flexibility with your repayments.<\/p>\n\n\n\n<p>Drafty\u2019s line of credit allows you to borrow up to \u00a33,000 within an agreed amount of time. What\u2019s more, you can reuse your line of credit without having to go through another application, provided you\u2019ve completed your repayments.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"a_line_of_credit_has_a_spending_cap\"><\/span><strong>A line of credit has a spending cap<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A spending cap is good to help people lend responsibly. For example, <del>a<\/del> Drafty<ins>,<\/ins> <ins>a <\/ins>payday loan alternative allows you to borrow up to \u00a33,000 from your approved credit line, but you can reuse it if you meet your repayments.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"interest_rates\"><\/span><strong>Interest rates<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>It\u2019s well recognised that payday loan interest rates can be sky high. This is often due to the borrowing taking place over a shorter period and being of more risk in the eyes of a lender. However, where a line of credit like Drafty is concerned, interest rates are much lower. <a href=\"https:\/\/www.drafty.co.uk\/compare-loans\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>Take a look at our comparison page<\/strong><\/a> to see for yourself.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"is_a_drafty_line_of_credit_right_for_you\"><\/span><strong>Is a Drafty line of credit right for you?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Want to find out how a Drafty line of credit can help boost your cash flow? Check out our \u2018<a href=\"https:\/\/www.drafty.co.uk\/about\/aboutus\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>About Drafty<\/strong><\/a>\u2019 page.<\/p>\n\n\n\n<p><strong>Disclaimer:<\/strong> We are not providing financial advice, these are just tips for informational purposes. Also, we are not affiliated to any of the external parties, these links are provided for reference only.<\/p>\n\n\n\n<p><strong>Also Read About:<\/strong><\/p>\n\n\n\n<div class=\"wp-block-columns is-layout-flex wp-container-core-columns-is-layout-9d6595d7 wp-block-columns-is-layout-flex\">\n<div class=\"wp-block-column is-layout-flow wp-block-column-is-layout-flow\">\n<figure class=\"wp-block-embed is-type-wp-embed is-provider-the-breeze wp-block-embed-the-breeze\"><div class=\"wp-block-embed__wrapper\">\n<blockquote class=\"wp-embedded-content\" data-secret=\"PpZNJOJJif\"><a href=\"https:\/\/www.drafty.co.uk\/blog\/do-payday-loans-affect-your-credit-score\/\">Do Payday Loans Affect Your Credit Score? Know the Truth<\/a><\/blockquote><iframe loading=\"lazy\" class=\"wp-embedded-content\" sandbox=\"allow-scripts\" security=\"restricted\" style=\"position: absolute; clip: rect(1px, 1px, 1px, 1px);\" title=\"&#8220;Do Payday Loans Affect Your Credit Score? 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Many of us have experienced this stress, which is why we sometimes need a cash boost to tide us over. But, with so many different products available on the market, it\u2019s often hard to decipher which one is right for us. Before [&hellip;]<\/p>\n","protected":false},"author":47,"featured_media":771,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4],"tags":[],"class_list":{"0":"post-645","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-research"},"_links":{"self":[{"href":"https:\/\/www.drafty.co.uk\/blog\/wp-json\/wp\/v2\/posts\/645","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.drafty.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.drafty.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.drafty.co.uk\/blog\/wp-json\/wp\/v2\/users\/47"}],"replies":[{"embeddable":true,"href":"https:\/\/www.drafty.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=645"}],"version-history":[{"count":3,"href":"https:\/\/www.drafty.co.uk\/blog\/wp-json\/wp\/v2\/posts\/645\/revisions"}],"predecessor-version":[{"id":1163,"href":"https:\/\/www.drafty.co.uk\/blog\/wp-json\/wp\/v2\/posts\/645\/revisions\/1163"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.drafty.co.uk\/blog\/wp-json\/wp\/v2\/media\/771"}],"wp:attachment":[{"href":"https:\/\/www.drafty.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=645"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.drafty.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=645"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.drafty.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=645"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}