Overdraft Interest Calculator

Overdraft interest is calculated daily on the outstanding balance. You pay only for what you use and only for the days you use it. Loans charge interest on the full principal from disbursement.

Overdraft rates are usually higher than secured loans, ranging from 10% to 24% annually. However, because you pay only on the used amount, short-term usage can be cost-effective.

Yes. Banks may charge overdraft setup fees, annual maintenance fees, and penalty charges if you exceed your approved limit. Always read the fine print.

While both have relatively high interest rates, there are key differences. Overdraft interest is calculated daily on the outstanding balance and charged only for the period you use the facility. Credit card interest is also calculated daily but applies to the entire outstanding balance from the statement date if you do not pay in full by the due date. Overdrafts typically have lower interest rates than credit cards, ranging from 10-24% compared to 30-48% for credit cards.

Yes, most overdraft facilities are demand loans, meaning the bank can revoke or reduce your overdraft limit at any time without prior notice, especially if your account conduct deteriorates or your credit score declines. This reinstatement risk is an important consideration when relying on overdrafts for regular business operations. Maintaining a good relationship with your bank and a healthy credit profile reduces this risk.

Overdraft interest rates in India vary by the type of overdraft and the lender. For overdrafts against fixed deposits, rates are typically 1-3% above the FD rate, ranging from 6-9% annually. For unsecured overdrafts on savings accounts, rates range from 12-24% per annum. Business overdraft facilities against inventory or receivables carry rates of 10-18%. Penalty rates for exceeding the overdraft limit can be 2-5% higher than the standard rate. Interest is calculated on the daily closing balance, so the effective cost depends on how much you use and for how long.

An overdraft is a revolving credit facility that allows you to withdraw up to a sanctioned limit from your bank account, paying interest only on the amount used and only for the days it is used. A personal loan is a one-time lump sum disbursed upfront, repaid in fixed EMIs over a set tenure. Overdrafts offer flexibility you can draw, repay, and redraw within the limit but charge higher interest rates (12-24%). Personal loans offer lower rates (10-18%) but lack flexibility. Overdrafts suit irregular cash flow needs, while personal loans are better for planned, one-time expenses.

The maximum overdraft limit on a savings account in India depends on the bank, your relationship, and your credit profile. Most public sector banks offer overdrafts of 5,000 to 25,000 on basic savings accounts as a pre-approved facility. Premium savings accounts with higher average balances may qualify for limits of 50,000 to 5 lakh. For overdrafts against fixed deposits, the limit is typically 70-90% of the FD amount. Salary account overdrafts can be up to 2-3 times your monthly salary depending on the bank and your employment history with the company.

Yes, most Indian banks offer an overdraft facility against fixed deposits, typically up to 70-90% of the FD amount. This is one of the cheapest forms of overdraft because it is fully secured by your FD. The interest rate is usually 1-3% above the FD interest rate, making it very affordable at around 7-10% per annum. The FD continues to earn interest even while the overdraft is active, so the net cost is the difference between the FD rate and the overdraft rate. For example, if your FD earns 7% and the overdraft against it charges 9%, your effective cost is just 2%.

An overdraft facility can affect your CIBIL score in several ways. If you use a significant portion of your overdraft limit regularly, it increases your credit utilization ratio, which can lower your score. Late payments or exceeding the overdraft limit can also negatively impact your score. However, responsible use of an overdraft maintaining low utilization and paying interest on time can help build a positive credit history. Unlike a loan where the full EMI is reported as an obligation, overdraft utilization is reported as a revolving credit, and keeping utilization below 30-40% of the limit is ideal for your credit health.