An overdraft lets you borrow money through your saving or current account by taking out more money than you have in the account. In other words, you go “overdrawn.” There’s usually a charge for this.
You can ask your bank for an overdraft, and they might give you one but don’t forget that an overdraft is a type of loan. If you need to borrow money, there might be cheaper ways to do it. So it’s wise always to find the most affordable way to borrow.
An overdraft should be for short-term borrowing or emergencies only. It’s essential to manage an overdraft like any other debt and ensure the costs don’t get out of hand. It’s important to note that an overdraft helps cover short-term cash flow short-falls. However, they are not suitable for consolidating debts. Therefore, it is also termed an Overdraft Line of Credit.