4. Overdraft
An overdraft is when a bank lets you spend more than you already have in your account.
The overspend is recorded as a negative figure.
This source of finance is good for covering day-to-day costs, but not for long term costs.
Advantages:
- It's quick and easy to set up, banks will offer them to most people.
- They are flexible, you can borrow any amount of money up to the limit and only have to pay interest on what is borrowed.
Disadvantages:
- Banks can demand the money back at any time, even if you can't afford to pay them back.
- The interest is high.
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