An overdraft is another form of short-term finance. An overdraft means that the bank allows the account holder to continue withdrawing money even when the account has no funds in it. Overdraft fees can be incurred when the bank needs to cover the difference between what you spent and what you have.
Your bank account may already include an overdraft facility, or you may be able to apply for an overdraft as and when you need it. These are arranged overdrafts. Unarranged or accidental overdrafts occur when you withdraw too much money from your account and end up with a negative balance.
Whether arranged or unarranged, an overdraft always means that you are in debt to your bank. To avoid high interest rates which can increase the size of the debt, you should pay back the money you borrow as quickly as you can so as not to be in debt and waste your money on interest.