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 and you usually make the same agreed monthly payment amount every month. Whilst an overdraft is a loan where 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 it will reset to £2,000 again. You can call an overdraft an unsecured loan or a credit facility that you can call upon when you need it.
It’s because of this similarity that when you are struggling to make payments towards your overdraft, you are protected by section 7.3 of the Financial Conduct Authority (FCA) Handbook. Meaning you have options like making token payments.
This is just one option; we have reviewed other options that you may encounter highlighting any pros and cons without creditor or debt collector bias.
Head on over to our unsecured debt section to learn more about this and understand the pros and cons of other options you may have, as well as where to start. See you over there