Savings Account Payday Loans: 4 Benefits of Borrowing Against Your Nest Egg

[Jul 27, 2009.]

 

There are a variety of ways to borrow money to cover sudden expenses, such as medical bills or car repair costs. If you’re considering accessing payday loans, you have a couple of different options --checking or savings. Both methods have their advantages, but you’ll find that savings account payday loans get the nod for several important reasons. Here’s why.

1. A Savings Account is Immediately Liquid. In other words, you can access those funds same-day--as opposed to other savings-type accounts that can take several days to withdraw and cost you in the tax season. According to Mark Kantrowitz, FiLife blogger and financial consultant, using a checking account can be risky. The balance can fall between paychecks leaving the danger of not having enough in the account to cover payday loans on the repayment date.

2. Savings Accounts Build Back Value Quicker. It’s probably not even worth mentioning that the interest rates you earn on checking accounts are minimal. So rebuilding the value of those accounts are much tougher than with savings vehicles. The Prudent Minds blogs reveal that banks are placing more emphasis on establishing savings accounts for their customers by offering enhanced interest rates. Taking our payday loans from savings can lessen the impact of repayment over time.

3. Savings Account Can Rebuild Credit History. Many consumers who access payday loans might be on the lower end of the credit spectrum. In a Q and A session on Bankrate.com, Certified Financial Analyst Don Taylor suggests borrowing against a savings account or CD to improve credit rating as you repay your payday loans.

4. Savings Account Levels are More Stable. Just consider the amount of money that goes into and out of your checking account on a daily basis. The due dates for payday loans are solid--if you don’t have enough in checking to cover the repayment, you can easily default on the loan. Savings account payday loans are fixed to an account that remains fairly stable, provided you deposit more into the account that you withdraw.

The bottom line is that payday loans can be risky if you’re using them in conjunction with your checking account. The sheer instability of these accounts makes them difficult to manage when it comes time for reconciliation. On the flip side, savings account payday loans are increasingly measureable--a critical feature when borrowing money with potentially high interest rates and quick repayment terms.

 

About Author:

Kelly Richardson is a freelance writer, marcomm consultant and digital entrepreneur. He’s written content for Fortune 500s Google, Yahoo!, Microsoft and Wells Fargo. Find out more about him at kellyrichardsoncopywriting.com.