NAIS Money

Loans and money blogger.

If you have an overdraft then you may wonder whether it is worth trying to repay it. You may even find that you are advised that it is not worth repaying. It can be difficult to know what to do but you should be able to make the decision if you weigh things up.

About overdrafts

An overdraft is where you borrow money from a bank that you have a current account with. They might allow you to borrow a certain amount of money. This is called an arranged or authorised overdraft. They will have a certain fee structure for this. It might be possible for you to borrow more than this or to borrow if you have not arranged an overdraft and this is called an unauthorised overdraft and is much more expensive.

It is likely that with an authorised overdraft you will be charged a monthly standard fee and interest and with an unauthorised overdraft you will pay a daily fixed fee and higher interest. These can both be very expensive.


As you can see an unauthorised overdraft is very expensive and charged daily. You need to repay this as soon as you can because you need to avoid these charges. However, with an authorised overdraft you get charged monthly and however high your overdraft you get charged the same monthly fee. This means that if you pay small amounts off your overdraft that fee will not go down and so some people might say that it is not worth paying off as you are still paying that fee.

However, you are paying interest on top of that fee and that will reduce as you pay off the overdraft. You also will be getting loser to paying off the debt as you repay more and more of the overdraft, this will help you to feel more motivated to get it all paid off and avoid those charges. Even though you will pay the same charge however much you owe, your interest charges will go down.

One thing to be wary of though is that lenders are all different in the way that you charge so make sure that you are aware of how yours works. The charges and interest may be calculated and applied differently and this could have an impact on how you should think about repaying it. You may find too that if you have an unauthorised overdraft, pay some off so you are within your authorised overdraft but then spend some so you go back into the unauthorised this could be costly. If there is a one-off fee for going into the unauthorised overdraft you will be paying this over and over again as you go into it, pay you way out and go into it again, so try to make sure that you avoid doing this if your fee structure is like this.

Generally, overdrafts are really expensive and it is well worth repaying them as soon as you can. It is good to try to focus on doing this and think about how you can both reduce your spending and increase your income so that you can do this. It can be tricky to do this but if you stay focussed this can help. Realise that it will not be a permanent change, but that you will have to give up some things, such as buying items and your time in order to get it repaid. The sooner you get it repaid the less you will spend on it and therefore the more money you will have in the future. It can be hard trying to plan your future when you want things now but it is wise to make sure that you think of it. You can be more relaxed and wealthier if you plan things well. Repaying your overdraft will also improve your credit record. This means that if you want to borrow in the future, perhaps to buy a home or do repairs then you will be able to do so. If you keep the overdraft and have a poor credit record then you will not be able to manage this. It also does not make sense to keep paying out these charges to keep the overdraft. They are high and it is better to work out a method to repay what you owe so that you do not have to pay them anymore.

If you have other debts, then it can be a bit more complicated. You may be trying to work out which is the best to repay. If you want to save the most money then you will need to calculate which of the debts is costing you the most money and that will allow you to know which is dearest and you can start repaying that one first. However, you may feel that you want to repay the smallest debt first as you can eliminate it more quickly and that will give you a sense of achievement which you can carry when you tackle the next debt. If you think this will work for you then it is worth a try. Also, you may have personal reasons for just wanting to repay one first and so that might be the one you are more motivated to repay.

If you need money in a hurry then you might feel that your options are very limited and you should go for a payday loan. These loans can be arranged very quickly, even if you have poor credit and as they do no credit check they tend to be able to accept most people. There are other options though and it can be worth thinking about some of those before signing straight up to the payday loan. You may still decide that it is the right choice but at least you will be sure and you will be aware of your alternatives.


If you have a current account then an overdraft could be a solution for you. These will allow you to draw out more money than you have in your current account. You may have arranged an overdraft with the bank and they will have a limit on how much you can borrow. You may not have been able to do that or had that option offered to you but it might still be possible for you to have an unauthorised overdraft which will allow you borrow money with having agreed it with your bank. Overdrafts can be expensive though, particularly unauthorised ones. You will be charged interest and charges. For an authorised overdraft those charges might be monthly but for an unauthorised overdraft they could be daily. This means that the costs can really add up. It is therefore worth finding out how much these costs will be before deciding on using an overdraft. You could find that there are cheaper options.

Credit card

A credit card can be a cheaper option than an overdraft but it depends how long it takes you to pay off the debt. You may also not be able to get a credit card if you have a poor credit record. With a credit card you only have to repay a small minimum amount each month and this generally covers the interest on the debt and just a little bit more. This means that you are left with a big amount still owing which you will pay interest on the following month. You can pay off more or clear the whole debt but obviously you will need the money to be able to afford to do this. Credit cards vary in cost and so you will need to compare them to see which looks like it would offer the best value for money. If you know that you will pay off as much as you can each month, t can be a good option. However, if you know that you will probably spend as much as you can and pay off as little as you can, then it will become a very expensive option. So, make sure that you think about whether this would be a wise option for you.


If you have any savings then it is much better to use these to pay for emergencies than to borrow money. Although you will be missing out on interest form those savings, you will find that the amount you pay in interest and fees on a loan will be much higher. It can often be difficult to part with our savings because we have spent a lot of time accumulating them. However, it is wise to try to distance yourself form emotion and just think about the money that you will save in doing this and that you will be able to build your savings back up in time.

Going without

It is worth making sure that you really need the money. You may feel that it is an emergency that you have to have it. However, make sure that it really is. Think about whether there are any other things that you can go without that you can use the money for towards the emergency instead. It may be that you can go without paying out the money right now, that you can delay or just go without entirely. If it is for a bill, for example, then you might be able to call the supplier and se eif they will allow you to pay a bit later, perhaps after you have been paid. It is worth trying as you have nothing to lose.

Ask a friend

You could always ask a friend of family member if they can help you out with the money. Some people do not mind doing this and are happy to admit to friends and family when they need money. Others though, find it hard as they do not want to let people know that they are struggling. However, there may be people out there that are willing to help you and it could save you a lot of fees compared with borrowing. It can be worth thinking about this option as it could be helpful.