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Overdrafts in the UK: How to Manage Repayments and Avoid Fees
Are Overdrafts Just Like Personal Loans?
Overdrafts are a form of unsecured borrowing, similar to personal loans. The key difference is that a personal loan is typically issued as a fixed lump sum with agreed monthly repayments, while an overdraft is a flexible credit facility.
Example
If you have a £2,000 overdraft and only use £100, you’ll repay just the £100 plus applicable interest (like a credit card). Once repaid, your overdraft resets to £2,000.
Your Rights Under FCA Regulations When Struggling with Overdrafts
If you’re struggling to repay your overdraft, you’re protected under Section 7.3 of the FCA Handbook. This ensures fair treatment and access to solutions such as:
- Token payments: Reduced, affordable repayments while you regain financial stability.
- Alternative repayment plans: Explore options tailored to your circumstances.
Not sure which option’s right for you? Check out our Unsecured Debt section for the real facts, no bias, just honest answers. We got you!