What Loan Options are Available for Covering an Overdraft?

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When you’re juggling work, chores, and family life, it can be easy to accidentally overdraft on your account. Huntington is here to help you understand overdraft coverage options and provide tips on how you can manage the costs.

two hands pull a wad of cash out of a wallet

With a personal loan, you can borrow a small amount of cash for the purpose of covering a negative balance on your account. If you make a mistake and overdraft, it may seem difficult to make ends meet and pull together enough funds to cover the extra expense. Fees could build up the longer it takes you to pay off an overdraft, which may turn into a major strain on your budget. We’re here to offer information about several options for covering the unexpected expense of an overdraft.

The Difference Between a Short-Term Loan, an Overdraft Loan, and an Overdraft Line of Credit

To make the best decision for your financial situation, it’s important to consider the different options you may have in the event of an overdraft. A short-term loan, overdraft loan, and overdraft line of credit are three personal loan options that might be helpful for your circumstances. Every bank may offer different overdraft options, so make sure you investigate how your bank handles overdraft and the types of protection they may offer.

A short-term loan is when you borrow a lump sum of money that you’re required to pay back, usually with interest, in a short amount of time. You may need to start making repayments as soon as 30 days after taking out your loan. With a short-term loan option, you can typically qualify for anywhere from $100 to a few thousand dollars. This can be helpful to cover an overdraft and ensure you will have a small amount of money to help you cover an overdraft on your account. However, you might have to pay back a larger amount with a higher interest rate.

An overdraft loan allows quick access to a small amount of money to help you cover an overdraw on your account. The loan amount is typically anywhere from $75 to a thousand dollars with applicable interest rates and fees. You have a bit more flexibility in repaying an overdraft loan, as you can typically choose to separate payments into installments or pay off the amount in one lump sum of money.

An overdraft line of credit is a loan option that may help you avoid fees and extra charges if your checking account ends up in the red. If you get an approval, you will have access to a predetermined line of credit attached to your account to help you cover overdraft fees and possibly avoid other financial problems like bounced checks or missed automatic payments. Depending on your finances, your credit limit may not be enough to make this option a viable one to cover an overdraft and any applicable interest rates or fees.

Huntington continues to offer most standard personal lending options but when you have an established checking account and meet the requirements, you may also qualify for Standby Cash to help cover an unexpected expense or overdraft.

Standby Cash Need Extra Cash? We’re Here to Help!

Here’s a fact—sometimes money gets tight. Big expenses, small expenses, they can add up. That’s why Huntington invented Standby CashΩΩ. Huntington keeps extra cash on standby for our customers. You can qualify for Standby Cash based primarily on your checking and deposit history, not your credit score.

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Standby Cash is a line of credit that could be available to you right now. Log into your Huntington account online or in the mobile app to see if you qualify. You could access between $100 and $1,000 in just a few clicks. And it’s free (meaning zero interest) when you set up automatic payments and pay it back over three months, otherwise a 1% monthly interest charge (12% APR) applies to your outstanding balance.

To qualify for Standby Cash, you need a personal checking account with consistent monthly deposits of $750 or more for three consecutive months. With Standby Cash you can access a line of credit based primarily on your checking and deposit history with us, not your credit score. Once your Standby Cash line is open, it is available for immediate use. Once you open Standby Cash, the account and your activity are reported to credit reporting agencies, so your use could positively or negatively affect your credit score.

While Standby Cash is not overdraft protection, Huntington customers can leverage the credit to pay an overdrawn account balance. If your account remains overdrawn for more than 24 hours, you become ineligible for Standby Cash. So, make sure to keep an eye on your finances to possibly avoid an overdraft before it happens and so you can take advantage of every opportunity to quickly remedy an overdraft when it occurs.

Overdraft Protection

Many banks offer protection to possibly prevent an overdraft. If you have more than one account registered with your bank, you may be able to sign up for overdraft protection through a transfer. For example, you can apply to have money automatically transferred from your savings account to cover an overdraft on your checking account. You could also link a credit line or a credit card to cover an overdraft as well. Fees may apply to these options, depending on your bank or account terms§.

You can typically help avoid an overdraft or return fee by keeping track of your account balance or signing up for overdraft protection, which automatically transfers money from your other accounts to cover overdrafts. Huntington customers can take advantage of 24-Hour Grace® and $50 Safety Zone℠ to possibly help avoid overdraft and return fees altogether.

At Huntington, we know surprise bills and unexpected events occur, which is why we offer 24-Hour Grace, along with $50 Safety Zone. These two combined account features can help protect you from overdraft and return fees. 24-Hour Grace gives you more time to make a deposit before midnight Central Time the next business day, and $50 Safety Zone covers overdrawn accounts by $50 or less.

How Overdraft Fees Work

Overdraft fees occur when a transaction causes your account balance to drop below zero and you no longer have enough funds to cover the transaction. Your bank or credit union will typically charge you a fee that is a fixed amount regardless of the transaction amount. For example, if a $60 purchase causes an overdraft on your account, your bank may charge a flat rate of $35 per overdraft. In this instance, you would then owe the bank $95 to cover the overdraft and the fee.

Fees for an overdraft can be expensive, especially if you’re working paycheck to paycheck or dealing with a tight budget. For specifics on how Huntington handles overdraft fees, check out our Overdraft Fees Explained page.

How to Apply for a Personal Loan to Cover an Overdraft

If you find that you need a loan to make ends meet after an overdraft, you can usually apply for a personal loan with your bank or another financial institution. Lenders may require information about your credit history and credit score in addition to a relationship history with the bank or financial institution. Once you have an approval, a personal loan can help put money in your account so you can pay off an overdraft and any applicable fees. An overdraft loan can help you put money in your account after an overdraft and possibly avoid incurring more penalties by preventing your account from staying negative over a longer time period. After you cover the overdraft and settle your account, it’s time to set up a repayment plan on the loan.

How to Repay a Personal Loan

When repaying a personal loan, you may have the option to set up weekly or monthly payments, or you can pay off the amount in a lump sum of money. Banks and financial institutions have different repayment options and requirements depending on your loan amount, interest rates, and other factors. Check with your lender upon applying for a personal loan about finance charges, repayment loan options and expectations.

Advantages and Disadvantages of Bank and Personal Loans

Bank loans are a way for you to quickly access money to cover an unexpected financial emergency or accidental overdraft. They can help you cover costs in a timely manner and help ensure your account has enough funds to avoid fees. However, bank loans can come with their own fees, interest rates, and conditions. Paying back a loan could mean added strain on your weekly or monthly budget, which may necessitate cutbacks or adjustments in your financial planning. If you are unable to pay back your loan on time, it can have a negative affect on your credit and may inhibit your ability to get approval for overdraft coverage or loans in the future.

Does Having an Overdraft Affect Getting a Loan?

Mistakes happen. If you accidentally overdraft on your account once or twice, the consequences might not be too severe if you have protection plans in place and pay the overdrawn balance swiftly. Having multiple overdrafts on your account or having your account charge off could negatively impact your consumer reports making it more difficult for you to open new bank accounts or borrow money in the future. If you take out a personal loan or line of credit, borrowing that money comes with a risk to your credit score if you make payments late or miss them entirely. A lower credit score because of an unpaid loan could greatly affect your approval for larger loans in the future for purchases like houses or cars.

If you make consistent, timely payments on what you owe, your ability to get an approval for loans in the future will likely not be impacted.

If you’re not yet a Huntington customer and interested in taking advantage of Standby Cash, apply for a Huntington checking account to start establishing your relationship.

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Standby Cash is a service mark of Huntington Bancshares Incorporated. Standby Cash is patent pending.

ΩΩ Subject to terms and conditions and other account agreements. Available through online banking or the Huntington Mobile app to individuals with an active consumer checking account open at least three months with consistent monthly deposit activity of $750 or more. Other eligibility requirements apply. Amount available through Standby Cash is subject to change based on changes to customer eligibility, including checking and deposit activity, overdrafts, and daily balances. A 1% monthly interest charge (12% Annual Percentage Rate) will be added to outstanding balances if automatic payments are not scheduled. If 100% of the approved credit line is drawn three months in a row, Standby Cash will be suspended until it’s paid to a zero balance. When any of your Huntington deposit accounts are in an overdraft status for more than one day, your Standby Cash line will be suspended until they are no longer negative. Business checking accounts are not eligible for Standby Cash.

Standby Cash may only be used to fix an overdraft while 24-Hour Grace® is in effect. If any of your checking or deposit accounts remain overdrawn for more than one day, your access to Standby Cash will be suspended. Once your accounts are no longer overdrawn, your access to Standby Cash may be reinstated.

§Transfers from lines of credit may be subject to applicable finance charges.

Your account will be automatically closed if it remains negative in any amount for 60 days, including if your account is overdrawn within our $50 Safety Zone. Learn more at huntington.com/SafetyZone and huntington.com/Grace.

The information provided in this document is intended solely for general informational purposes and is provided with the understanding that neither Huntington, its affiliates nor any other party is engaging in rendering financial, legal, technical or other professional advice or services, or endorsing any third-party product or service. Any use of this information should be done only in consultation with a qualified and licensed professional who can take into account all relevant factors and desired outcomes in the context of the facts surrounding your particular circumstances. The information in this document was developed with reasonable care and attention. However, it is possible that some of the information is incomplete, incorrect, or inapplicable to particular circumstances or conditions. NEITHER HUNTINGTON NOR ITS AFFILIATES SHALL HAVE LIABILITY FOR ANY DAMAGES, LOSSES, COSTS OR EXPENSES (DIRECT, CONSEQUENTIAL, SPECIAL, INDIRECT OR OTHERWISE) RESULTING FROM USING, RELYING ON OR ACTING UPON INFORMATION IN THIS DOCUMENT EVEN IF HUNTINGTON AND/OR ITS AFFILIATES HAVE BEEN ADVISED OF OR FORESEEN THE POSSIBILITY OF SUCH DAMAGES, LOSSES, COSTS OR EXPENSES.

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