An arranged overdraft feels like part of your current account, so it's easy to treat it as spare money. It isn't cheap. Since April 2020, banks can only charge overdrafts as a single annual interest rate, and most of the big banks set that rate at around 40%. That's often more than a credit card.
This guide shows how long an overdraft takes to clear, a simple plan to get back into the black, and how to stop slipping back in every month.
How long will it take?
Take a £1,500 overdraft at 39.9%. If you stop using it and pay a fixed amount off each month, here's roughly how it goes:
| Paid off each month | Time to clear | Interest paid |
|---|---|---|
| £50 | about 15 years 4 months | about £7,660 |
| £75 | 2 years 10 months | about £1,010 |
| £100 | 1 year 10 months | about £610 |
| £150 | 1 year 1 month | about £350 |
At £50 a month you're barely covering the interest, which is close to £50 a month on its own. Adding just £25 more cuts the time from over 15 years to under three. With an overdraft, small increases make a huge difference.
Try your own overdraft in the free payoff calculator to see your clear date and interest.
Why overdrafts are hard to clear
An overdraft has no fixed repayment. Your salary lands, pulls the balance back towards zero, and then everyday spending drags it down again. Unless you deliberately leave the account a little higher each month, the balance never really falls. The fix is to treat it like a loan with a set monthly payment.
A step-by-step plan
- Find your real numbers. Check your overdraft balance, its interest rate and your arranged limit in your banking app.
- Pick a monthly amount. Use the table above or the calculator to choose a payment that clears it in a time you're happy with.
- Lower your limit as you go. Each month, ask your bank to reduce the arranged limit by your payment amount. You can't slip back into money you no longer have access to.
- Move spending to a separate account. Open a basic account with no overdraft, have your spending money paid into it, and leave the overdrawn account to recover.
- Use any windfall. A tax refund, bonus or money from selling something clears an overdraft faster than almost anything else.
Cheaper ways to clear it
- A 0% overdraft: some banks offer an interest-free buffer, or 0% overdrafts on student and graduate accounts. Switching banks to get one can stop interest while you pay it down.
- A money transfer card: some credit cards let you move money into your current account at 0% for a set time, for a one-off fee. It only helps if you clear it before the 0% ends. See is a 0% balance transfer worth it? for how to judge these deals.
- A low-rate personal loan: if your credit score allows, a loan with a lower rate and a fixed end date can cost less. Only do it if you'll also cut your overdraft limit, or you risk ending up with both.
When to get help
If your overdraft is at its limit every month, you're using it for essentials like rent or food, or you're getting unarranged overdraft or returned payment warnings, talk to your bank. Banks must treat customers in financial difficulty fairly, and they can freeze interest or agree a repayment plan.
Free, confidential debt advice is also available from organisations like StepChange, National Debtline and Citizens Advice. You'll find them on our financial resources page.
Paying off more than one debt?
If you also have cards or loans, an overdraft at 40% is often the most expensive debt you have. Putting extra money there first (the avalanche method) usually saves the most interest. The payoff calculator compares orders for all your debts at once.
Examples assume a fixed 39.9% rate, monthly interest, no new spending and no fees. Your bank's rate and how it calculates interest may differ. This guide is general information, not financial advice.