In a Nutshell

A negative bank account is a red flag for lenders, and many will reject your application for a cash advance or loan. The key to a successful financial future is to avoid an overdrawn checking account. If you miscalculate or make a mistake, finding ways to bring your account positive quickly is critical. A title loan can be a temporary fix, but the key is to prevent overdrafts from occurring in the first place.

When you’re in the middle of an overdraft crisis, it’s important to explore the various loan options that can help cover the shortfall. The stress of not having enough money to cover your expenses and spending can be stressful. However, with the proper steps, you can make your checking account balance positive again.

Some loans are off-limits if you have a negative bank account, but you may have other options. First, ask your bank if you are eligible for an overdraft loan. They may offer a lump sum loan or a line of credit. Both charge interest and fees but protect you from unnecessary overdraft fees.

If your bank doesn’t offer overdraft loans or you aren’t eligible, other options include payday loans or title loans. Both loans are short-term loans with high interest rates. A payday loan, however, requires payment on your next payday, whereas title loans allow more flexibility with terms ranging from one month to three years.

These options are all temporary solutions to cover your negative account balance. The key is to change your overall budget and spending habits to avoid overdraft fees in the future.

What Does a Negative Bank Account Mean?

When your checking account balance goes below $0, it’s a negative bank account. This means you spent more money than you had available in your account. Some banks allow the payment to go through, even if you don’t have the money. However, you must make up the difference quickly, or you could face high fees or risk account closure.

Good to Know: Why is it so Hard to Get a Loan Without a Bank Account?

If you have a negative bank account, chances are other areas of your financial profile aren’t what banks want to see. For example, lenders will consider you high risk if you have a low credit score or a high debt-to-income ratio. Lenders base interest rates and fees on your risk of default. They’ll likely view you as risky if you’ve proven you can’t manage your finances.

What is the Cost of Getting a Loan with a Negative Bank Account?

To get a loan that doesn’t look at your bank account balance or doesn’t use it as a qualifying factor, you’ll likely pay higher interest rates and fees. Traditional bank loans require you to disclose information about your assets. If that information isn’t positive, banks will likely decline your application.

Unfortunately, higher interest rates and fees means the loan costs more than if you qualified for a loan with better terms.

6 Ways to Regain a Positive Bank Account Balance

If your bank account balance is negative, you must act quickly to return it to a positive number. Here are six ways to fix an overdrawn account:

Stop Making Withdrawals

The first step is to stop making withdrawals. This will only worsen the problem and make it harder to regain a positive balance. For the time being, don’t use your debit card or write any checks. Instead, assess the situation and determine how much money you need to bring the account to a positive balance.

Put Money Into the Account as Quickly as Possible

If you have money available, transfer it to your negative checking account immediately. The faster you turn the negative balance positive, the faster the overdraft fee stops. Even if you have to take money from a savings account or sacrifice a purchase, you’ll be happy you did in the end.

Sell Items You Own

If you have valuable items you don’t want, you may sell them for cash instantly. Consider hosting a yard sale, selling on eBay, or listing items on Facebook Marketplace to sell them fast.

Get a Part-Time Job

If you have a few hours a day to dedicate to another job, consider temporarily taking on a part-time job. Use the funds to bring your bank account balance back up, and in the future, use the money as a buffer so it doesn’t happen again.

Start a Freelance Gig

If you’d rather work on your own terms and have some basic skills, you can start a freelance gig. Common examples include data entry, freelance writing, or website design. You could also work as an independent contractor for Uber or DoorDash to make extra money.

Link a Savings Account

If you have a savings account, consider linking it to your checking account for overdraft protection. If you go over your checking account balance, the bank can use your savings account to make up the difference. 

Good to know: What happens if your bank account goes negative? Answer: Most banks charge overdraft fees daily. Plus, if your account remains negative for too long, they may close it. Banks can also report your negative bank account to ChexSystems, which is the equivalent of a credit report for bank accounts.

How to Prevent a Negative Balance and Overdraft Fees

The key to avoiding overdraft fees is to prevent a negative balance from developing. Here are a few quick ways to fix your financial situation.

Ensure you Always Balance your Bank Account

Balance your checkbook often. This way, you always know how much money you have and what you can spend. Most banks have mobile and online access, so you can always check your balance in real time.

Create a New Budget

If you regularly overspend, revisit your budget. You may have more money scheduled to go out than you make. Redo your budget and stick to it so you don’t spend more than you make. Budgeting is a critical step in financial planning and can help improve your cash flow.

Look for Free Checking with No Overdraft Fees

Some banks don’t allow overdrawn accounts. This prevents you from paying overdraft fees but means vendors will decline your transaction if you don’t have enough money. However, if you balance your checkbook regularly, you’ll always know how much you can spend, and it won’t be a problem.

Set up Automated Alerts

See if your bank offers low balance alerts. You can usually set the threshold and decide whether you want notifications sent via email, text, or both. When you get those notifications, pay close attention and stop spending until you have more money in the account.

Pay Bills Manually

If your bill payments have pushed your balance into a negative territory, consider ending automatic payments. You can always handle the bill payments yourself. This will make you more aware of what you’re spending and what you have available and prevent you from paying overdraft fees.

How Title Loans can Help With a Negative Bank Account Balance

If you’re experiencing a financial emergency because you have a negative bank account and no money to bring it positive, a title loan may help. Title loans use your car as collateral. You can borrow up to 70% of the car’s value but only borrow what you need to bring your account current.

Title loans require installment payments but are usually short-term, ranging from a few months to three years. Lenders focus on the car’s value and your ability to repay the loan, not so much on your credit history or bank account balance. However, these loans should only be used after exhausting all other options.

Final Thoughts

There are options for loans with a negative bank account, but they will typically cost you in interest rates and fees. Do what you can to keep your bank account balance positive and prevent overspending. If you have an emergency and can’t help but overdraft, a title loan may help you out of your financial emergency, but it’s only a temporary solution.

Connect with us today to learn how a title loan works, and to see how much you may qualify for to handle your financial emergency.