For many, overdrafts are an essential part of everyday banking while for others, it could be the start of the debt spiral.

The regulator, the Financial Conduct Authority (FCA) has raised concerns about unarranged overdraft fees, which it said were difficult for consumers to understand.

Separate research by Moneycomms last week revealed that arranged overdraft users – where an amount below zero has been agreed – can also be stung with high fees.

In fact, the research found that customers of the big high street banks are being charged up to 81% interest for a £500 agreed overdraft for seven days.

Later this week, Lloyds Banking Group, including Halifax and the Bank of Scotland, is set to scrap all unauthorised overdraft fees, adopting a daily rate model of 1p for every £7 of planned overdraft usage, equivalent to an interest rate of 52%.

However if you need to borrow money and want to do it without dipping into an arranged or unarranged overdraft, Andrew Hagger of Moneycomms says: “For some people a bank overdraft can be very expensive with fixed monthly or daily fees becoming more commonplace. It’s worth looking at other options such as personal loans from P2P lenders or being smart with credit card offers.”

He lists these alternatives:

Personal loans

Personal loan rates have been coming down recently as competition in the market fired up. £1,000 is the minimum most providers will be able to lend to you in the form of a personal loan.

Hagger lists these three competitive rates and the amount you’ll need to pay back if borrowing £1,000 over a 12 month term:

• Saga 7.9% APR (over 50’s only) – total payback £1,041.84
• Nationwide Building Society 15% APR – total payback £1,077.72
• AA Loans 17.9% APR – total payback £1,092.12.

Peer to Peer loans

P2P lending works by matching individual borrowers or companies with savers who are willing to part with their money in the hope of getting higher rates of interest than they would receive from mainstream savings products. For borrowers, the rates offered can also be lower than high street offerings.

Again looking at £1,000 of borrowing over a 12 month period, borrowers could get the following interest rates, according to Hagger:

• RateSetter 9.5% APR – total payback  £1,050.00
• Zopa 9.5% APR – total payback  £1,050.00
• Lending Works 14.7% APR – total payback £1,076.28.

Credit Cards

There are a range of credit cards to suit your spending needs. However, Hagger warns that if you take advantage of a credit card promotional rate, you need to make sure all your monthly repayments arrive on time, otherwise you will forfeit the introductory rate and you’ll be charged 19% APR or more.

As such, it’s a good idea to set up a direct debit for the minimum monthly payment just in case.

0% on purchases for 31 months from Sainsbury’s Bank. 0% purchase cards allow you to buy items and spread the cost without paying any interest. This card comes with 18.9% rep APR.

Otherwise Hagger lists the MBNA 5 credit card which charges 4.9% typical APR for five years. If you want to switch money from the card , there’s a one-off transfer fee of 0.5% so if you switched £1,000 to your bank account the fee is £5 and interest at 4.9% works out at approximately £4.16 per month.