Personal Overdrafts

An overdraft can be a convenient option if your account occasionally slips into the red, or if you're after credit to use as and when you need it. Personal overdrafts are a line of credit that you can add to an everyday transaction account. Once you exhaust your available funds you'll be able to access an additional credit limit.

How does a personal overdraft work?

Personal overdrafts are a type of credit attached to an everyday transaction account. You'll be approved for a set limit and be able to draw funds up to and including that limit whenever you need it. Your overdraft funds will only be accessed when the other funds in your account have been exhausted.

You may have to pay a fee to set up your overdraft and you'll pay interest on the amount you use. Once you put money back into your account you'll be able to access the total amount of your overdraft again.

Personal overdraft vs personal loan: Which is right for you?

How do I find the best personal overdraft account for me?

As with any financial choice you make, you should compare personal overdrafts in order to get the best deal possible. You’ll also want to pick the best loan for your personal financial situation.

• Do you already have an account with the lender? You will need to have a transaction account with the provider to get a personal overdraft. If you don't have an account already you will need to set one up, so you'll need to take this into account.
• How much will it cost? Fees to look out for include upfront fees such as establishment fees and ongoing fees in the form of monthly or annual fees.
• What interest rate will you be charged? Since a personal overdraft is an unsecured loan, variable interest rates generally apply. Most banks only ask that you pay interest on the money you use, but you’ll still want to find the best interest rate available.
• Minimum requirements. Some lenders may set a minimum requirement for how much your personal overdraft loan should be. Compare your options so you don't take out a higher credit limit than you need.
• Application process. If you’re the type of person that is looking for a simple enrolment process you’ll want to examine all of your options to find the simplest one for you.

Compare personal lines of credit

We don't have any personal overdrafts available for comparison, but you can compare a range of line of credit products in the table below.

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Product AUFPL	Interest Rate (p.a.)	Min Loan Amount	Max. Loan Amount	Application Fee
Credit24 Line of Credit	From 24% (variable)	$500	$10,000	$0	Go to siteMore Info Compare	loading Fetching your data...

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Weigh up the benefits and drawbacks before you apply

Is there anything you should avoid?

• Overusing the account. Sometimes people overuse their personal overdrafts just because it's conveniently attached to their transaction account. If you apply for and get a personal overdraft you should make sure you only use it when it’s necessary. Most personal overdrafts just charge interest on the money you use, so make sure to use only what you need to save yourself interest payments.
• Taking the first loan you see. Make sure to compare personal overdrafts based on the applied fees and charges, interest rates, and any lender requirements, in order to get the best deal that suits your personal situation.

How you can apply for a personal overdraft

Once you've compared the personal overdrafts available you can start the application process. Each bank or lender will have its own application process and eligibility criteria.

Generally, to open a personal overdraft you must be an Australian citizen or permanent resident with a valid Australian address. You must also be 18 or older and pass a credit evaluation to determine if you can afford the loan. That means the lender may require information regarding your employment and income as well as personal assets.

Have more questions about personal overdrafts?

• How small of an overdraft can I apply for?

  Most banks offer personal overdrafts starting at $100.

• Can't I just keep overdrawing my account?

  Overdrawing your account regularly is not a good idea. You will be charged an overdraft fee each time this happens. Also, lenders may request copies of your bank statements when you apply for a loan and the overdrafts will be listed. This will affect your ability to be approved for the loan.

• Should I just get an overdraft from my current bank?

  This can be a convenient option to consider because you need to have a transaction account to attach the personal overdraft too. However, when you compare your options you might find that your bank charges high fees or interest with its personal overdraft. Opening a transaction account is relatively simple and you have the option of holding multiple accounts so you can take advantage of offers from other banks.

• Can I withdraw money from an overdraft?

  Yes, you can withdraw money from an overdraft, just like you would with your regular bank balance, as long as you stay within your approved overdraft limit. The funds accessed through an overdraft are treated as a loan, so you will need to repay the amount borrowed along with any applicable interest.

• What is a personal overdraft?

  A personal overdraft is a facility linked to your bank account that allows you to withdraw more money than you have in your account, up to an approved limit. It acts as a short-term borrowing option, providing a safety net for unexpected expenses. You only pay interest on the amount you use, making it a flexible but potentially costly form of credit.

• Does personal overdraft affect credit score?

  Yes, a personal overdraft can affect your credit score. Regularly using your overdraft or exceeding your limit can signal financial instability, potentially lowering your credit score. However, responsibly managing your overdraft, such as repaying it promptly, can help maintain or even improve your credit score.

• What is the difference between a personal loan and a personal overdraft?

  The key difference between a personal loan and a personal overdraft is how the funds are accessed and repaid. A personal loan provides a lump sum that is repaid in fixed installments over time, with a set interest rate. A personal overdraft, on the other hand, allows you to withdraw funds as needed, up to a limit, with interest charged only on the amount used. Personal loans are better for planned expenses, while overdrafts are suited for short-term, flexible borrowing.

• Do you have to pay back overdraft?

  Yes, you have to pay back the amount you borrow using an overdraft. The bank will expect you to repay the overdraft amount along with any accrued interest and fees. Failing to repay an overdraft can lead to additional fees, increased interest and potential damage to your credit score.

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Written by

Matt Corke

Head of Publishing Ventures

Matt Corke is Finder’s head of publishing ventures. Prior to this he was head of publishing for Australia, New Zealand and emerging markets. Matt built his first website in 1999 and has been building computers since he was in his early teens. In that time, he has survived the dot-com crash and countless Google algorithm updates. See full bio