If you're struggling with your overdraft

This advice applies to England. See advice for See advice for Northern Ireland, See advice for Scotland, See advice for Wales

There are things you can do to help you manage or pay off your overdraft. 

Before you try to pay off your overdraft, make sure you deal with your most important debts first. These are called ‘priority debts’. They include:

  • rent and mortgage 

  • gas and electricity

  • council tax

  • court fines 

Check if you have any priority debts before dealing with your overdraft.

Work out what you can afford to pay

Start by making a budget to check if you can afford to pay off your overdraft. 

Try to be as accurate as you can. Before you make a budget, find your most recent:

  • bank statements

  • payslips

  • debit and credit card statements 

  • receipts for things you usually pay for in cash

You can create your budget using the budgeting tool on the National Debtline website.

If you have money left over after you’ve paid your essential bills and expenses, you can use it to start paying off your overdraft. Any money you leave in your account and don’t spend will help reduce your overdraft.

If you have any direct debits, check if you can change when the money is taken. If it's taken just before you get paid, you'll be in your overdraft for a shorter time and you'll pay less interest.

You should also check if you can switch to a bank account with an interest-free overdraft. This will let you pay off your overdraft without more interest being added. Your overdraft will usually only be interest-free for a limited time.

If you can't afford to pay off any of your overdraft

If your financial situation is unlikely to get any better, you should contact your bank. They might agree to:

  • temporarily pause interest or fees on your overdraft debt

  • let you pay any essential costs like food and bills before paying off your overdraft

You have a right to use your income for your bills and living expenses. This is called the ‘first right of appropriation’ - mention this right to your bank if it doesn't allow you to use your income to pay your bills. This won’t stop the bank from paying out any direct debits or subscriptions - they might add charges if you don’t have enough money in your account. 

Think carefully about taking out a loan to pay off your overdraft. It might cost you more and cause problems if you can't afford the payments. Talk to an adviser.

If you should open a basic bank account

It’s worth checking if you can get a basic bank account with a different bank. A basic bank account doesn’t have an overdraft. You can open one even if you have a bad credit score. 

You can get your income paid into your new account. This means the bank you have an overdraft with can’t take the money you owe them. You can then pay off the overdraft at a rate you can afford.

If your bank reduces or removes your overdraft limit

Your bank can ask you to pay off all of the money you owe them at any time. They might do this if you keep going over your agreed limit.

You should contact your bank if they tell you they’re going to restrict or remove your overdraft. You should explain your situation and tell them why you’re struggling to pay off your overdraft. If you think you’re vulnerable you should let your bank know - they have to treat you fairly.

If you’re struggling to pay, your bank might:

  • offer you a repayment plan this might include a personal loan

  • reduce the interest on the money you owe them

Your bank might say they’ll reduce the amount of overdraft you can have gradually, for example over 3 months.

If your bank is planning to do things you can’t afford, talk to an adviser.

If you're struggling with the cost of living

Tell your bank if you’re struggling to pay off your overdraft and tell them it’s because of the cost of living. Your bank should try to help you - if they don’t, you should raise a complaint with them.

If they still don’t do anything to help, you can take your complaint to the Financial Ombudsman. The Financial Ombudsman is independent. They’ll examine your case from both sides to reach a decision they think is fair. 

You’ll need to talk to the Financial Ombudsman within 6 months after you hear back from your bank about your original complaint.

Contact the Financial Ombudsman Service on their website.

If your bank sends you a default notice

Your bank might send you a default notice if you don’t pay. This is a letter telling you that you need to repay your debt or your account will be closed.

Contact your bank. You might still be able to agree to a repayment plan with your bank. They’ll close your account but they won’t take any other action.

If you don’t pay within 2 weeks of the default notice and don’t agree to a payment plan, the bank might take you to court. Check what to do if you're being taken to court for debt.

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Page last reviewed on 10 January 2023