Fix 3: Add Discord to the whitelist of your third-party antivirus application.
If you are using third-party antivirus applications on your PC, then you may face the Discord overlay, not working issues. Your third-party antivirus application might interfere with Discord; hence, your Discord overlay may won’t run as expected. You can try to add your Discord to the whitelist of your third-parties antivirus application.
Fix 4: Check for software interruption.
Perhaps the Discord overlay not working issue is also caused by the break from other applications running on PC. Try temporarily disabling all of them to see if your Discord overlay works. If you are running the programs that also have the overlay features, or you are running the programs which can gain access to your Discord microphone, then they may interfere with your Discord overlays.
The programs such as screen recorders are most likely to interfere with the discord overlays.