Did you know overdrafts are just like personal loans? They're unsecured.
The difference between a personal loan and an overdraft is that a personal loan is usually given to you all at once as a fixed amount. You typically make the same agreed monthly payment amount every month. An overdraft is a loan that you pay based on usage. If you have a £2,000 overdraft and you do not use it, you shouldn’t have to pay anything towards it.
Here's an example
If you use £100 of your overdraft, you will need to pay back just the £100 plus interest if applicable (similar to a credit card). Once paid, the overdraft will reset to £2,000 again. An overdraft is an unsecured loan or a credit facility that you can use when you need it.
Due to this similarity, you are protected by section 7.3 of the Financial Conduct Authority (FCA) Handbook when you struggle to pay your overdraft. Meaning you have options like making token payments.
This is just one option. We have reviewed other options you may encounter, highlighting their pros and cons without bias toward creditors or debt collectors.
Head over to our unsecured debt section to learn more about this, understand the pros and cons of other options you may consider, and find out where to start. See you over there.