A bank overdraft is flexible way of borrowing money over a short term. It can be cheaper to borrow this way as interest is only charged on the amount outstanding.

Some banks and building societies may offer you a basic interest-free overdraft, which can be useful if you ever experience cash-flow difficulties. But do not overstep the mark by borrowing more than your agreed limit as you will be charged a punitive fee by your bank and the interest rate will not be competitive. If you do need to increase your overdraft limit, make sure you agree it with your bank first