Overdraft or instalment loan? Comparing costs and paying off your Dispo

An instalment loan is cheaper than an overdraft as soon as you cannot clear a balance within a few weeks. The rate gap is currently around two percentage points, but most of the saving comes from fixed repayments: with a loan, the debt goes down every month, while an overdraft often stays at the same level for months. From 20 November 2026, your bank must also inform you about your overdraft every month and give you at least 30 days' notice before cancelling or cutting the limit.

Key points

• Average overdraft rate according to Stiftung Warentest, Germany's consumer testing foundation: 10.99 percent (as of 18 May 2026, more than 1,000 banks). The most expensive bank charged 15.39 percent.
• New consumer loans cost an average of 8.91 percent APR in September 2026 according to the Bundesbank. In August the figure was 8.99 percent, the highest since this series began in January 2003.
• €3,000 left unchanged in an overdraft for a year costs about €330 in interest at 10.99 percent. A 12-month instalment loan at 8.91 percent costs about €141, and afterwards you are debt-free.
• From 20 November 2026, every Dispo comes with monthly statements, at least 30 days' notice of cancellation and an offer to repay in twelve monthly instalments (§ 504 BGB, the German Civil Code).
• The ECB left its key rates unchanged on 29 October 2026. The deposit facility rate is 2.50 percent.

How much does an overdraft cost compared with a loan?

An overdraft costs around two percentage points more than an average instalment loan, and much more at many banks. The figures depend on who is measuring.

Stiftung Warentest surveys the overdraft rates of more than 1,000 banks and savings banks and takes a simple average. On 18 May 2026 it stood at 10.99 percent, compared with 11.22 percent a year earlier. The Bundesbank, Germany's central bank, weights rates by lending volume and combines overdrafts, current-account credit and credit card debt. It puts the September 2026 rate at 9.46 percent, up from 9.32 percent in July.

Credit type	Rate	As of
Overdraft, bank average	10.99 %	May 2026 (Warentest)
Overdraft, most expensive bank	15.39 %	May 2026 (Warentest)
Overdrafts, volume-weighted	9.46 %	Sept. 2026 (Bundesbank)
Consumer loans, APR	8.91 %	Sept. 2026 (Bundesbank)

For consumer loans, the Bundesbank interest rate statistics show a clear rise, from 8.35 percent in June to 8.99 percent in August 2026. Behind this are two ECB rate hikes of 0.25 percentage points each, effective from 17 June and 16 September 2026, as the ECB's key rate history shows. On 29 October 2026 the Governing Council kept rates unchanged: 2.50 percent for the deposit facility, 2.65 percent for main refinancing operations. Further steps will depend on the data. To compare individual offers, use the APR (Effektivzins), because it includes costs as well as interest.

Worked example: €3,000 for a year in your overdraft or as a loan?

If €3,000 stays in your overdraft for a year, you pay about €330 in interest and still owe €3,000 afterwards. A 12-month instalment loan costs about €141, and at the end everything is repaid.

Assumptions: overdraft rate 10.99 percent (Stiftung Warentest average, May 2026), loan 8.91 percent APR (Bundesbank average, September 2026), no other fees. For simplicity, both rates are treated as effective annual rates, with monthly instalments. In practice, the overdraft rate is a borrowing rate that banks charge on the daily balance and usually debit quarterly, which tends to make the overdraft slightly more expensive.

Scenario	Interest over 12 months	Debt afterwards
Overdraft left as is	about €330	€3,000
Overdraft paid down by €264 a month	about €173	€0
Loan, €262 a month	about €141	€0

The overdraft you pay down consistently costs only about €32 more than the loan. If the overdraft stays put, the difference is about €189, and the €3,000 debt remains. If you have the discipline for a fixed monthly payment, you can clear the overdraft yourself. If you tend to slip back into the red, the fixed instalments of a loan help. Run your own figures in the loan vs overdraft calculator.

When does it pay to replace your overdraft with a loan?

Replacing the overdraft pays off if your account has been in the red for several months and you cannot clear the balance in the next few weeks. For short overdrafts, for example until your next salary arrives, the Dispo is more flexible and costs little in absolute terms.

The law itself gives a pointer. Under § 504a BGB, your bank must offer you advice if you have used your overdraft continuously for six months at an average of more than 75 percent of the limit. The conversation covers cheaper alternatives, such as an instalment loan. From 20 November 2026, the bank must also refer you to debt advice services under the new Act on Access to Debt Advice Services for Consumers.

Three points favour an instalment loan:

• Fixed term: you know when the debt will be repaid.
• Fixed rate: the borrowing rate (Sollzins) of an instalment loan is usually fixed for the whole term, while the overdraft rate is variable.
• Lower rate: around two percentage points less on average, and much more at expensive banks.

On the other side, a loan requires a credit check, which becomes stricter from 20 November 2026. And you can repay an overdraft at any time without an early repayment charge (§ 504(1) sentence 2 BGB). How to calculate refinancing in general is explained on the loan refinancing page.

How do you pay off your overdraft with a loan, step by step?

The process is short: work out the amount, compare loans, clear the account and reduce the overdraft limit. The last step decides whether the switch lasts.

1. Set the amount: your current negative balance plus interest up to the next quarterly statement, no more.
2. Check the instalment: the monthly payment must still work when an unexpected bill arrives. A slightly longer term is better than a new overdraft.
3. Compare offers: use the loan comparison with a rate enquiry (Konditionsanfrage). Look at the APR and the total amount payable, not the lowest advertised rate.
4. Clear the account: have the loan paid into your current account so the overdraft drops to zero straight away.
5. Reduce the limit: ask your bank in writing to lower or remove the overdraft limit. Otherwise it is there again for the next gap.
6. Build a buffer: a small cushion in an instant-access savings account (Tagesgeld) stops you slipping into the red with the next bill.

What changes for overdrafts from 20 November 2026?

From 20 November 2026, stricter information and cancellation rules apply to overdrafts, including accounts that already existed. The basis is the act implementing the EU Consumer Credit Directive (Federal Law Gazette, BGBl. 2026 I No. 139). The transitional rule in Art. 229 § 71(2) of the Introductory Act to the Civil Code, EGBGB (Article 2 of the act), applies the new §§ 504, 504a and 505 BGB to all open-ended existing contracts.

The changes in detail (Article 1 of the act):

• Monthly information: the bank must tell you at least once a month about the balance, borrowing rate and charges on your overdraft (§ 504(1) BGB).
• Notice before cancellation: if the bank cancels or reduces the limit, it must inform you at least 30 days before this takes effect (§ 504(2) BGB).
• Repayment in instalments: if you have used the cancelled amount, the bank must offer you, before any enforcement proceedings, the option to repay it without extra costs in twelve equal monthly instalments at the overdraft rate.
• Tolerated overdraft (geduldete Überziehung): if you regularly go into the red without an arranged overdraft or beyond your limit, you must also be offered advice under § 504a BGB (§ 505(2) BGB). The credit check must take place before the bank agrees a charge for the overdraft.

The instalment offer after a cancellation matches the second row of the worked example: twelve instalments at the overdraft rate. A loan you take out yourself is usually cheaper. The other changes in the act, such as the usury limit and the new withdrawal rules, are covered in the overview New credit rules from 20 November 2026.