How do I clear my overdraft fastest?

The fastest route is to give the overdraft the instalment it does not have: a fixed amount that goes onto the account every month and stays there. Work with the balance just before payday, because interest is charged on the amount in the red and on the days it stays there. Set the amount low enough that you do not have to pull it back later in the month, otherwise the balance only falls on paper.

Why is overdraft interest so high?

An overdraft is credit with no term, no repayment schedule and no security, available instantly and repayable at any time. The bank has to keep the agreed limit available even in the months you do not use it, and it has no date on which it gets its money back. That availability is the point of the product, and it is priced into the rate. The figure for your own bank is in its published price list.

Is it worth refinancing an overdraft with a personal loan?

On the arithmetic it is worth it when the loan rate sits below the overdraft rate, and it changes something larger: an open balance becomes an instalment with an end date. The trap comes afterwards, because the overdraft limit stays in place and is fully available again. If it gets used, the household pays the loan and the overdraft at the same time. Settle what happens to the limit before the loan is paid out.

What happens if I go beyond my overdraft limit?

The part above the agreed limit carries its own higher rate for as long as it is open. The bank is not obliged to allow it and can refuse payments instead, which brings returned-payment charges from whoever was being paid. Where an account stays heavily overdrawn over a longer period, the bank has to approach you and offer advice on cheaper options.

Should I pay off my overdraft or my loan first?

Compare the rates and serve the higher one first, as long as nothing is overdue on either. An overdraft normally sits at the top, and it has a second advantage: every dollar works the same day, because the balance drops immediately and the interest calculation follows. An extra payment on a personal loan is tied to whatever the contract allows.

What does it mean to be permanently in your overdraft?

It means the overdraft has taken over the job a buffer on a separate account would otherwise do. That happens on its own, because the product has no end date and nobody collects an instalment for it. Changing it takes the two things the overdraft does not come with: a fixed amount that reduces it, and a small balance outside the current account for bills that arrive without warning.

Clearing an arranged overdraft, and giving it an end date

A personal loan ends on a day written into the contract. For an arranged overdraft that day is nowhere, because it does not exist until you set it yourself.

By Deniz Erginos. Updated 11/10/2026

An arranged overdraft (in Germany a Dispokredit) is the one form of credit in an ordinary household that does not repay itself. A personal loan has a term, a fixed instalment and a date on which it is finished. An overdraft has none of that. The bank grants you an amount, you may use it, and you may pay it back whenever you like. That freedom is why it stays: no repayment plan is running in the background, no instalment leaves the account on its own, and no balance gets smaller every month. It has no end at the back either, it runs as long as the account runs, and the bank asks nothing of you while you stay inside the agreed limit. The balance moves up and down, and nothing about it counts down. If the overdraft is going to shrink, somebody has to decide that, and that somebody is you.

The month puts the balance back where it started

The pattern repeats. Your salary lands, the account sits a little less deep in the red for a few days, then the rent, the insurance, the direct debits and the shopping go through, and by the end of the month the balance is back where it was before payday. The overdraft was not reduced, it was briefly relieved. That is the point that decides the cost, because interest here is not charged on a loan amount. It is charged on the amount actually in the red, and on the days it stays there. A fortnight deep in the red costs more than a fortnight just under the line. Look only at the balance on the first of the month and you are looking at a different overdraft from the one you pay for. Settlement is usually quarterly, and your bank’s price list names the interval. The bank takes the interest from the same account that is already in the red, which adds it to the balance the next round of interest is charged on.

The agreed limit: it is in your online banking and in the account terms, and it is usually tied to your regular income.
The rate on the overdraft or line of credit: it sits in the account disclosure or fee schedule rather than in the banking app, it is variable, and the bank may change it. German banks publish it in the Preis- und Leistungsverzeichnis.
The rate for going beyond the agreed limit: a second, higher figure in the same price list.
The lowest balance of the past few months. Look at the days just before payday, because that is the amount actually being financed.
The total of your fixed direct debits: it decides which day of the month that lowest balance arrives.
The interest posting on your statement: it usually comes quarterly and shows what the overdraft cost over the past three months.

Art. 247a § 2 EGBGB, Gesetze im InternetThe official German wording on price information for overdrafts. Paragraph 2 requires a bank to state the borrowing rate for the arranged overdraft clearly in its fee information and on its website, paragraph 3 extends that to the rate for going beyond the limit.

Why the rate on an overdraft sits at the top

The rate on an overdraft normally sits above everything else a household borrows, and that comes from the product rather than from you. A personal loan is predictable for the bank: the term and the instalment are in the contract, so is the date of the final payment, and the amount is assessed once and paid out once. An overdraft has none of that. The bank has to keep the agreed limit available at all times, including the months when you do not touch it. It gets no security and no repayment date. You can take the limit to the floor on Tuesday and pay all of it back on Friday, without asking anyone and without a fee. That availability is the real benefit of an overdraft, and it is also what the bank prices into the rate. Owe the amount for months at a stretch and you are paying for flexibility you are not using in that time. The rate is variable as well, so it can move without you signing anything new.

Behind the agreed limit there is a second stage. The account slips past the limit, the bank lets the payment through anyway, and the part above the limit carries its own higher rate. That is the most expensive state a current account can be in, and it usually arrives without a decision: a direct debit lands the day before the salary, and the line is crossed. You do not feel the transition, because a card payment or a direct debit simply goes through. The bank is not obliged to allow it and can refuse payments instead, which brings returned-payment charges from the other side. In Germany, where an account stays heavily overdrawn over a longer period, the bank has to raise it with you and offer a conversation about cheaper options. That conversation is worth taking, because it is the moment to ask what the bank offers by way of refinancing.

§ 504a BGB, Gesetze im InternetThe official German wording on the duty to offer advice. Under paragraph 1 the bank has to offer a conversation once an arranged overdraft has been used without a break for six months at an average of more than 75 percent of the limit, paragraph 2 sets out what the conversation covers.

§ 505 BGB, Gesetze im InternetThe official German wording on going beyond the limit. Paragraph 1 requires the charge for it to be stated in the account agreement, paragraph 2 sentence 2 applies the duty to offer advice once the account has been over the limit for more than three months at an average above half the monthly money coming in.

Giving the overdraft an end date

Set an instalment yourself: Pick an amount that is reliably left over each month and treat it like a loan payment. The overdraft then falls in steps you can see coming. For that to hold, the amount has to be small enough that you do not pull it back in the second half of the month.
Refinance into a personal loan: A personal loan settles the overdraft and turns an open balance into a term, an instalment and an end date. The rate is normally lower, because the bank now gets a schedule and repayment.
The trap on refinancing: The overdraft does not disappear. Once it is settled the full limit is available again, and if it gets used the household carries both the loan payment and a fresh overdraft. So the decision about the limit belongs in the conversation before the loan is paid out.

A cleared overdraft stays cleared only if the next unexpected bill does not land back on it. That is what a small fixed amount outside the current account is for, in a savings account or a second account with no card attached. The size matters less than the separation. While the money sits in the current account it is part of the month and gets spent along with everything else, without anyone deciding that. Kept alongside, the tyre bill or the electricity adjustment gets collected from there, and the balance stays where it is. The buffer is not a savings goal, it is what stands in for the overdraft on small amounts. In practice the order is usually a small buffer first, then the payment against the overdraft, and once the buffer has been used it gets topped up before the next extra payment.

Find a counselling centre, BAG-SBThe German federal association for debt counselling runs the directory of recognised centres. Advice there is free of charge.

Getting help with debt, Consumer Financial Protection BureauWhere to find a non-profit credit counsellor in the United States, what a first session covers, and how to tell a genuine service from one that charges for the introduction. It does the part no app can.

The app

The day you set yourself becomes a countdown in the app: the overdraft balance as the debt, your fixed amount as the monthly payment, and the date is there. Every payment you record moves it forward, in days rather than percent. No account, no bank connection.

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Common questions

How do I clear my overdraft fastest?: The fastest route is to give the overdraft the instalment it does not have: a fixed amount that goes onto the account every month and stays there. Work with the balance just before payday, because interest is charged on the amount in the red and on the days it stays there. Set the amount low enough that you do not have to pull it back later in the month, otherwise the balance only falls on paper.
Why is overdraft interest so high?: An overdraft is credit with no term, no repayment schedule and no security, available instantly and repayable at any time. The bank has to keep the agreed limit available even in the months you do not use it, and it has no date on which it gets its money back. That availability is the point of the product, and it is priced into the rate. The figure for your own bank is in its published price list.
Is it worth refinancing an overdraft with a personal loan?: On the arithmetic it is worth it when the loan rate sits below the overdraft rate, and it changes something larger: an open balance becomes an instalment with an end date. The trap comes afterwards, because the overdraft limit stays in place and is fully available again. If it gets used, the household pays the loan and the overdraft at the same time. Settle what happens to the limit before the loan is paid out.
What happens if I go beyond my overdraft limit?: The part above the agreed limit carries its own higher rate for as long as it is open. The bank is not obliged to allow it and can refuse payments instead, which brings returned-payment charges from whoever was being paid. Where an account stays heavily overdrawn over a longer period, the bank has to approach you and offer advice on cheaper options.
Should I pay off my overdraft or my loan first?: Compare the rates and serve the higher one first, as long as nothing is overdue on either. An overdraft normally sits at the top, and it has a second advantage: every dollar works the same day, because the balance drops immediately and the interest calculation follows. An extra payment on a personal loan is tied to whatever the contract allows.
What does it mean to be permanently in your overdraft?: It means the overdraft has taken over the job a buffer on a separate account would otherwise do. That happens on its own, because the product has no end date and nobody collects an instalment for it. Changing it takes the two things the overdraft does not come with: a fixed amount that reduces it, and a small balance outside the current account for bills that arrive without warning.