Do you have a question in mind that “Can I get an Overdraft Loan with bad credit?”. Check this guide to find out more.
When you’re weighing all your loan options with a bad credit score, and you come across overdraft loans, you ask yourself, ‘Can I get an overdraft with bad credit?’. Well, we got the answer for you, but first, you need to understand what overdraft loans are because diving into something headfirst without proper information is no smart move. You can call your bank anytime asking for an overdraft, but we don’t recommend that right way; it’s important to do your research first and explore your options. Here’s all you need to know about overdrafts and if you can get an overdraft loan with bad credit.
What is an Overdraft Loan?
An overdraft is a credit line provided by a lender when a customer’s account balance falls below zero. It enables the account holder to withdraw cash from his account even if there are no funds in it. It usually occurs when an account has no more funds, yet an outstanding transaction is performed through the account, resulting in the account holder acquiring a debt.
Secured and unsecured overdrafts are the two forms of overdrafts. A payroll account, a savings account, or a term deposit can all be used as collateral for an overdraft loan. With a bank overdraft, you can fulfill short-term cash needs with a flexible payback schedule.
Can you get an Overdraft with Bad Credit?
A bad credit overdraft is uncommon, as few banks will grant one to someone with a poor credit history. If you look at the policy of most banks, you’ll find that getting an overdraft always requires a credit check. A simple bank account or even a guaranteed account (that would not require a credit check) may be a better option for you if you have a poor credit score.
Your personal circumstances, specifically how often and how much you anticipate going into your overdraft, will decide what to look for when comparing current account overdrafts. Some people may be fine with a little interest-free overdraft, but others who are more likely to accrue considerable debt should think about the account’s overall interest rate.
Process of getting an Overdraft
By speaking with the provider you want to switch to, you can apply for a current account with overdraft just like any other current account. If you want to change your current account completely, the Current Account Switch Service can assist. It promptly transfers your direct debits and standing orders to your new supplier, ensuring that you never miss a payment.
How does an Overdraft affect Credit rating?
As long as you don’t go over your overdraft limit or have payments refused, a scheduled overdraft is unlikely to have a significant impact on your credit score. In fact, if you utilise your overdraft responsibly and pay it off regularly, your credit score may improve.
This is because an overdraft will appear as a debt on your credit record. This means lenders will be able to see if you have an overdraft, how much of it you’re spending, and what your limit is. Maintaining the same current account for several years will help your credit history develop, which can improve your credit scores.
There are several online platforms where you can check your overdraft eligibility, such as Natwest.
There are many various sorts of credit options on the market, and some will be better suited to your needs than others. If you’re on the fence about taking out an overdraft, you might want to check out some of these.
- Payday loans
- Personal Loans
- Credit Card
If you have more question on how to get an overdraft loan with bad credit, then let us know in the comment section.