Overdraft Interest Calculator

Work out exactly what your overdraft usage costs — interest accrues daily, only on what you draw, only for the days you use it.

🏦 Overdraft Interest Calculator

Currency:

Amount Utilised ₹ The drawn amount, not your sanctioned limit

Interest Rate (% per annum) FD-OD: ~FD rate +1–2% | Business OD: 10–15%

Days Outstanding Exact days the amount stayed drawn

The Daily-Interest Mechanics Behind Every OD

An overdraft inverts the loan model. A term loan hands you the full amount on day one and charges interest on all of it from day one. An OD sanctions a limit; interest exists only when — and only to the extent — you actually draw:

Interest = Σ (daily drawn balance × annual rate ÷ 365)

Draw ₹5,00,000 at 11% for 18 days, repay, then draw ₹2,00,000 for 9 more days: (5,00,000 × 0.11 × 18 ÷ 365) + (2,00,000 × 0.11 × 9 ÷ 365) = ₹2,712 + ₹542 = ₹3,254 — versus ₹4,520 a 30-day flat loan of ₹5 lakh would have cost.

Banks debit accrued interest monthly to the same account. One subtlety worth knowing: if the debited interest pushes your drawn balance higher and you don't service it, next month you pay interest on interest — undisciplined ODs compound quietly.

The Five Flavours of Overdraft in India

Type	Secured Against	Typical Rate	Typical Limit
OD against FD	Your fixed deposit	FD rate + 1–2%	85–95% of FD value
OD against salary	Salary credits	12–16%	2–3× net monthly salary
OD against property	Mortgaged property	9.5–13%	50–65% of value
OD against securities	Shares / mutual funds	9.5–12.5%	50% of equity / 75–80% of debt MF value
Cash credit (business)	Stock + receivables	10–15%	Drawing power per stock statements

The quiet champion here is the FD overdraft: instant, paperless at most banks' apps, no credit check, and your deposit keeps earning. Breaking a 7% FD early (penalty ~1%) to meet a 3-week cash crunch is strictly worse than drawing an OD at 8.5% against it for 21 days.

OD vs Term Loan — Match the Tool to the Cash-Flow Shape

The decision rule is about how long the money is needed, not how much:

Short, lumpy, repeating needs (inventory cycles, GST payment weeks, salary-date gaps) → OD. Paying 12% for 20 days costs 0.66% of the amount; flexibility is worth the higher headline rate.
Long, fixed deployment (machinery, renovation) → term loan. A permanently-drawn OD is the most expensive way to hold long-term debt: you pay the rate premium forever and the limit can be cut at annual review.

Banks watch for "hardcore utilisation" — an OD that never returns to credit. It signals stress and invites limit reduction; healthy OD accounts swing between drawn and surplus through the month.

What an Unused OD Costs

Many borrowers keep an OD as a standby emergency line — sensible, but not free. Typical charges even at nil utilisation: processing/renewal fee 0.25–1% of limit annually, and on larger business limits a commitment charge (0.25–0.5%) on the unutilised portion. A ₹20 lakh standby line can quietly cost ₹10,000–25,000 a year in non-interest charges. Right-size the limit to realistic need, not vanity.

Frequently Asked Questions

Is an overdraft the same as a credit card?

Same revolving principle, very different economics. Cards offer a 20–50 day interest-free window but charge 36–42% past it; ODs accrue from day one but at 9–16%. Carrying any balance beyond a month is dramatically cheaper on an OD.

Does using an OD affect my credit score?

The facility and its utilisation report to bureaus. Staying persistently near 100% of the limit reads as credit hunger and weighs on scores; healthy in-and-out usage with regular interest servicing reads positively.

What is "drawing power" on a business OD?

For cash-credit limits, the bank lends against current assets. Each month you file a stock-and-debtors statement; the bank applies margins (say 25% on stock, 40% on receivables) and the result — drawing power — caps what you can draw, even below the sanctioned limit.

Home loan with an OD facility — worth it?

Products like SBI Maxgain link an OD to your home loan: parking surplus salary there cuts the interest-bearing balance daily, while the money stays withdrawable. For disciplined savers with fluctuating surpluses, these effectively earn the home-loan rate tax-free on parked funds — usually at a ~0.25% rate premium.

Can the bank cancel my OD suddenly?

OD limits are typically repayable on demand and renewed annually. Deteriorating financials, bounced cheques, or hardcore utilisation can trigger reduction or non-renewal at review. Never treat an OD limit as permanent capital.