Struggling to repay an overdraft: help and options

An overdraft is a loan built into your current account, and like any loan it has to be repaid. If you have reached the point where you cannot clear it, or you are living inside it month after month, you have options: your bank may be able to help directly, free debt advice is available from charities, and there are formal solutions such as repayment plans, breathing space, debt relief orders, IVAs and bankruptcy that can deal with overdraft debt along with everything else you owe.

The scale of the problem is well documented. StepChange, one of the UK's main debt advice charities, reports that more than half of its clients have overdraft debt, and that over three quarters (79%) of the clients it surveyed were constantly in their overdrafts in the 12 months before they came for advice¹. Going into your overdraft every month is itself a sign that free, expert debt advice may be needed².

Nothing in this page requires you to pay for help. Debt advice from StepChange, National Debtline and Citizens Advice is free, and getting it does not affect your credit score³.

Why so many people get stuck in an overdraft

An overdraft feels like part of your account rather than a loan, but that is exactly what it is. MoneyHelper describes an overdraft as a type of loan that often has interest, borrowed through your current account⁵. Because the money is simply there, available every day, it is easy to drift into using it for ordinary spending rather than for a one-off emergency, and then never to clear it.

The cost is a large part of the trap. MoneyHelper states that you will usually pay expensive daily interest to use an overdraft, and that it is a form of debt that should only be used for emergencies or as a short-term option⁴. StepChange is blunter still: it is an expensive way to borrow². The Bank of England notes that certain types of borrowing, such as overdrafts, revolving credit on your credit card and payday loans, charge higher interest than other forms of credit⁸. Interest that builds daily on a balance you cannot clear can grow faster than your ability to pay it down.

There is also a structural problem: an overdraft is not guaranteed. MoneyHelper warns that one reason an overdraft is not safe for long-term borrowing is that the bank could take it away if it thinks you are over-using it and are in financial difficulty⁵. Someone relying on their overdraft to reach the end of the month can lose that cushion at short notice, which can tip an awkward balance into a crisis.

Unarranged overdrafts add a further layer. These, also known as unplanned overdrafts, happen when you spend more than you have in your account without agreeing it in advance, including going over the limit of an arranged overdraft⁵. The FCA's rulebook defines an unarranged overdraft as a regulated credit agreement that arises when a personal current account becomes overdrawn without an arranged overdraft, or when the firm makes funds available beyond the limit of an arranged overdraft⁹. Fees or interest usually apply if you spend more than you have, including where there is not enough in the account to cover a Direct Debit or standing order¹⁰.

StepChange's research shows how quickly this becomes a way of life. Of the clients it surveyed, 79% were constantly in their overdrafts in the 12 months before seeking advice, and more than half of all its clients have overdraft debt¹. The charity has called for banks to do more to help their clients out of their arranged overdrafts in an affordable way¹. If you recognise yourself in those numbers, the rest of this page sets out what help exists.

What your bank can do to help

The first conversation is usually with the bank itself. MoneyHelper sets out what banks might do for customers who are worse off following the April 2020 overdraft changes: reduce or waive interest, offer a continuation of overdraft borrowing at the current rate of interest, or agree a repayment programme, possibly including a personal loan⁵. In other words, the bank can convert an overdraft you cannot clear into structured repayments you can afford, or stop the interest mounting while you deal with it.

The FCA's rules on overdraft repeat use are relevant here. Under CONC 5D, a customer is likely to experience financial hardship if they are unable to pay priority debts or essential living expenses¹¹. The FCA expects firms to identify customers in this position and to help them, which is why it is worth telling the bank plainly that you are struggling rather than hoping the problem resolves itself. The dedicated page on overdraft repeat use: the FCA rules explains what the regulator requires.

If you fall into an unarranged overdraft, the consequences can be serious. nidirect, the Northern Ireland government service, warns that you may have to pay a penalty charge and a high rate of interest, that the bank may also charge for sending a reminder letter and for direct debits or cheques put through the account, and that the bank may freeze the account until the overdraft is paid off¹². A frozen account is a practical emergency, which is another reason to contact the bank early.

Two related points are worth knowing. First, if you are using your overdraft, you will have to pay it back before you can close your account, and you will lose access to statements, so keep copies if you need them¹³. Second, if you want to switch accounts while overdrawn, the position depends on whether the new bank will give you an overdraft that covers what you owe: if it does, the funds are sent to your old bank and you owe the balance on the new account instead; if it is a lower amount, or you cannot get one, you will need to arrange to pay off the remainder separately before you can switch or close the old account¹³. The narrow guide to switching while overdrawn covers this in detail.

If the bank will not help, or you are unhappy with how it has treated you, you can complain to the bank and then to the Financial Ombudsman Service. The ombudsman handles complaints involving the cost of living, and Citizens Advice can refer complaints to local Trading Standards officers and share complaint information nationally with enforcement authorities, including Trading Standards, the Competition and Markets Authority and regulators, so that action can be taken¹⁴.

Free debt advice: where to start

Debt advice is the step that unlocks everything else on this page, and it costs nothing. StepChange describes its advice as free and impartial¹⁵, National Debtline states it is "Free to use. Always."¹⁶, and Citizens Advice offers free advice on debt and other money problems¹⁷. The FSCS, the body that compensates customers of failed financial firms, points people struggling to repay money they owe towards free debt advice from organisations including StepChange, Which? and Citizens Advice⁶. Government guidance is the same whether the creditor is a bank or HMRC: free, confidential and independent advice is available from a debt adviser¹⁸, and nidirect notes that many organisations offer free and independent advice on debt management plans and any other kind of debt problem¹⁹.

How the advice works is broadly the same everywhere. You tell the adviser what you owe, including your overdraft, what money comes in and what you must pay for essentials. The adviser then works out what you can realistically afford and which solutions fit. StepChange offers free, flexible debt advice based on a comprehensive assessment of your situation, with practical help and support for as long as it is needed¹⁷. National Debtline can be reached by phone, webchat or its My Money Steps tool¹⁶. Advice NI and similar organisations provide the same service in Northern Ireland¹⁹.

One option an adviser may discuss is moving the debt somewhere cheaper. StepChange notes that one way to deal with an overdraft is to repay the balance using credit with a lower interest rate, such as a balance transfer to a credit card or an affordable loan². Whether that is realistic depends on your circumstances and credit record, and it is the kind of judgement a free adviser can help with. The comparison page on overdraft vs personal loan sets out the differences.

If your income has fallen, the advice may start with the budget rather than the debts. StepChange's guidance on unemployment and reduced hours includes a simple warning that is worth repeating here: try not to increase your overdraft²². Growing the debt to manage a shortfall usually makes the eventual reckoning harder.

StepChange, National Debtline or Citizens Advice: how each one helps

The three main free advice services overlap a great deal, but each has its own shape.

StepChange Debt Charity has been helping people for over 30 years²³. Its online debt advice tool is available 24 hours a day, and its advice is also available over the phone, with the option to switch to the phone part of the way through the online process¹⁵. Its helpline is 0800 138 1111²⁴. StepChange states it will not share your details with anyone¹⁵, and it can refer you to a fellow debt advice charity where face-to-face advice is what your situation calls for²³. It also offers free debt management plans²⁵. StepChange is also a major gateway into the breathing space scheme: official insolvency statistics show it registered 54% of breathing spaces between the start of the scheme in May 2021 and 30 June 2026²⁶, and 56% of breathing spaces in England and Wales between May 2021 and 31 July 2026²⁷.

National Debtline has also been giving free debt advice for over 30 years²⁸. It is an independent registered charity, authorised and regulated by the Financial Conduct Authority¹⁶. You can call, chat online or use its My Money Steps tool¹⁶. Its webchat is open Monday to Friday 9am to 8pm and Saturday 9:30am to 1pm²⁹. National Debtline states that your details will never be shared¹⁶. Its guides cover specific techniques as well as general advice: for example, its guide to the debt avalanche method, which prioritises debts by interest rate, uses a worked example that includes an overdraft of £400 with a minimum payment of £0²⁸.

Citizens Advice offers free advice on debt and other money problems¹⁷, through a network of local offices. Its helpline in England and Wales operates Monday to Friday, 9am to 5pm¹⁴. Citizens Advice also handles related issues that often sit alongside debt: it offers a free service for gambling problems³⁰, guidance on what to do if you have been scammed³¹, and it can refer complaints to Trading Standards and share information with national enforcement authorities¹⁴. Demand for its debt help has been rising: Citizens Advice has reported that the number of people it has helped with debt issues is on an upward trend, increasing in every month for the last five months³².

None of the three charges for advice, and none will share your details without your agreement. Which one suits you is mostly a matter of how you prefer to talk: online tools at any hour, a phone call, or a face-to-face meeting.

Getting advice does not affect your credit score

A common and costly fear is that asking for debt advice marks your credit file. It does not. StepChange states it plainly: "Getting advice will not affect your credit file or impact your credit score."³ The same applies to its debt relief order process, where StepChange notes there is no impact on your credit score from getting advice³³. The Financial Ombudsman Service makes the same point about talking to a lender: "Discussing your options won't have any impact on your credit file, for example."³⁴

What does affect your credit file is the solutions you may go on to choose. A debt management plan, a debt relief order, an IVA or bankruptcy will each appear on your credit record and affect your ability to borrow for years afterwards. That is a reason to take advice before choosing, not a reason to avoid advice. The page on how current accounts affect your credit file explains the mechanics.

The distinction matters because fear of the credit file stops people asking for help early, when the range of options is widest. Advice itself is confidential and leaves no trace; only the remedies you formally enter into do.

Debt management plans: free through a debt charity

A debt management plan (DMP) is an informal arrangement in which you pay what you can afford to your creditors each month, usually through a provider that distributes the money. Overdrafts can be included alongside credit cards, loans and other non-priority debts.

The critical point is cost. Some companies charge fees to set up and run a DMP; the debt charities do not. nidirect's guidance is to get advice before setting up a plan with a provider, and notes that organisations like StepChange Debt Charity offer free debt management plans¹⁹,²⁵. Paying a commercial firm for something a charity provides free reduces the money actually reaching your creditors.

A DMP is flexible: because it is informal, payments can change if your income changes, and it is not published in the same way a formal insolvency is. Its limits are equally real: it is not legally binding on creditors, so a bank could still pursue the overdraft, and interest is not automatically frozen, though creditors often agree to stop it. The FSCS notes that debt management firms can fail, and it covers customers of failed debt management firms, but it does not cover debt advice itself³⁵. If you use a charity, that protection question does not arise, because there is no fee at risk.

A DRO is not the only route where overdrafts are treated as ordinary debts. In bankruptcy in Northern Ireland, the money owed to the bank is a debt in the bankruptcy, and you must not make any payments direct to the bank unless it has a charge on your home³⁶. The same principle applies to a DMP: once the plan is running, payments go through it, not straight to the bank.

Breathing space: pausing interest and creditor action

The Debt Respite Scheme, usually called breathing space, gives people in problem debt temporary legal protection. The Northern Ireland department that extended the scheme describes it as providing "temporary legal protections from creditor enforcement action for people experiencing problem debt, including" pauses on enforcement action and freezes on most interest and charges⁷. The legislation sets the eligibility test: the debtor must be unable, or unlikely to be able, to repay some or all of their debt as it falls due, and a breathing space moratorium must be appropriate³⁷.

In practice, breathing space gives a window in which interest on most debts stops accruing and creditors, including your bank, cannot take enforcement action. That can stop an overdraft growing while you and an adviser work out what to do. A debt adviser, including StepChange, National Debtline and Citizens Advice, can start a breathing space for you; as noted above, StepChange alone has registered more than half of all breathing spaces since the scheme began²⁶,²⁷.

Two limits are worth knowing. First, breathing space is temporary: it is a pause to allow advice and a solution to be put in place, not a solution in itself. Second, not everything is covered. HMRC's guidance on qualifying loans states: "You cannot claim relief for interest on overdrafts or credit cards."³⁸ That rule concerns tax relief on interest rather than the breathing space freeze, but it is a reminder that overdrafts sit outside some protections that apply to other borrowing, and the detail of what a particular breathing space covers should be confirmed with the adviser who sets it up.

Other debt solutions: DRO, IVA and bankruptcy

Where a repayment plan is not enough, there are formal insolvency solutions. Each has conditions, and each has lasting consequences for your credit record, so this is where free advice matters most.

Debt relief orders (DROs) are for people with relatively low debts and little spare income or assets. National Debtline's guide sets out the exclusions: you will not be eligible if you are already bankrupt, in an IVA or under an interim order, subject to a bankruptcy restrictions order or undertaking or a debt relief restrictions order or undertaking, or have a bankruptcy petition pending unless a court has referred you for a DRO³⁹. DROs are not available in Scotland³³. The government's IVA protocol material gives one reason a DRO may be refused: your debts are more than £30,000⁴⁰. If a DRO is agreed, the debts in it are frozen and then written off, but the rules are strict about what is included. A debt left out cannot be included later, the creditor can continue to take action, and if it takes total debts over £50,000 the official receiver will consider revoking the DRO³⁹. Fraudulent debts will not be discharged at the end of the DRO⁴¹. One point that surprises people: benefit overpayments cannot be recovered by any method, including deductions from ongoing benefits, if they are included in a DRO³⁹.

Individual voluntary arrangements (IVAs) are formal agreements with creditors, usually over several years. If an IVA fails, it is not the end of the road: StepChange notes that if your IVA is cancelled, you can start looking into other solutions like a DRO³³.

Bankruptcy deals with debts you cannot pay, including overdrafts. In Northern Ireland, the money owed to the bank is a debt in the bankruptcy, and you must not make payments direct to the bank unless it has a charge on your home³⁶. Bankruptcy has serious consequences for assets, including potentially your home, and for your credit record, and it should never be entered without advice.

Which, if any, of these fits depends on your total debts, your income, your assets and where in the UK you live. That assessment is exactly what a free debt adviser does.

Help in Scotland, Wales and Northern Ireland

The debt solutions above differ by nation, and the advice services differ too.

In Scotland, debt relief orders are not available³³; Scotland has its own solutions, and National Debtline and Citizens Advice Scotland advise on them. Scotland also has its own welfare support: the Scottish Welfare Fund's statutory guidance states that local authorities should not refuse Crisis or Community Care Grants on the basis that the applicant has outstanding debts to the local authority, and that any grant should not be used to pay outstanding debt to a local authority⁴². There is also separate support if you cannot afford to top up your prepayment meter⁴³.

In Wales, Citizens Advice operates alongside Welsh provision. Carmarthenshire County Council, for example, advertises free debt advice online or over the phone as part of its cost of living support⁴⁴, and the Welsh Government has reported on rising demand for debt help, with Citizens Advice reporting an upward trend in the number of people helped with debt issues³².

In Northern Ireland, nidirect provides comprehensive guidance on overdrafts and other bank debts¹², debt management plans¹⁹, debt repayment options²⁵ and consolidating debts⁴⁵, and Advice NI provides free, independent advice¹⁹. The breathing space scheme has been extended to Northern Ireland by statutory instrument, with the associated Northern Ireland Bill withdrawn⁷. Bankruptcy in Northern Ireland treats an overdraft as a debt in the bankruptcy³⁶.

The nations page on money in Scotland, Wales and Northern Ireland covers the wider differences, and the debt section brings together the solutions that apply where you live.

Where debt charities cannot help

Free debt advice is broad, but it is not unlimited, and knowing the edges saves wasted time.

Some problems are not debt problems in the advice sense. Bailiffs cannot collect debts like payday loans, credit cards and overdrafts unless you have a county court judgment (CCJ) for them³, so if bailiffs are at the door over an overdraft without a CCJ, that is a point to raise with an adviser urgently. Some situations need a different service entirely: the UK Debt Service offers information and advice on compulsive spending³⁰, and Citizens Advice offers a free service for gambling problems³⁰, both of which address causes a repayment plan alone cannot.

Some grants and support have their own rules. The Scottish Welfare Fund guidance noted above means a grant should not be used to pay outstanding debt to a local authority⁴². Some debts cannot be paid in every way: HMRC does not allow Child Benefit overpayments to be paid by personal credit card⁴⁶.

And some solutions simply will not fit. A DRO is unavailable if your debts are more than £30,000⁴⁰, or if you live in Scotland³³. Where a charity cannot help with a particular problem, it will usually say so and point you to whoever can, which is itself worth having.

Watch out for firms pretending to be debt charities

Because free help exists, some firms dress up paid services as charity-style help. StepChange warns about firms that claim to be able to write off credit card debt: "These claims are misleading and could cost you more money."⁴⁷ The warning is sharpest for firms asking for upfront fees.

The protections to check are simple. Real debt charities (StepChange, National Debtline, Citizens Advice, Advice NI and their equivalents) do not charge for advice and do not ask for upfront fees to "write off" debts. National Debtline is an independent registered charity authorised and regulated by the Financial Conduct Authority¹⁶, and the same regulator oversees the debt management firms that do charge; the FSCS covers customers of failed debt management firms, though not debt advice itself³⁵. Advice Now's guidance on getting debt advice is blunt: "Never pay for debt advice. There are a number of great specialist debt charities who can help with your debts for free."²⁹

If you have already paid a firm that misled you, you can complain: to the firm, then to the Financial Ombudsman Service, which handles complaints involving the cost of living¹⁷. Citizens Advice can also refer complaints to Trading Standards and share information with national enforcement authorities¹⁴. And if the approach felt like a scam rather than a service, Citizens Advice offers guidance on what to do if you have been scammed³¹, and the scams and fraud section covers the warning signs.

The rule of thumb: if someone contacts you promising to clear your overdraft or other debts for a fee, that is the moment to hang up and call one of the free services instead.