Overdraft (OD) Interest Calculator
Overdraft Cost Breakdown:
- Utilized Limit (funds withdrawn): ₹1,00,000.
- Daily interest charges: ₹32.88 per day.
- Interest charges for 15 utilization days: ₹493.
- Overdraft interest is only charged for the exact amount and days used. If you keep the balance at ₹0, you pay zero interest.
What to do next
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Overdraft Daily Interest Formula
Calculates interest charges based on dynamic daily balances utilized within an overdraft account.
Worked Example: Utilized ₹50,000 of an overdraft line at 12% p.a. for 15 days
Overdraft Interest: Tracking daily interest on utilized limits
Harish secured an overdraft (OD) limit of ₹5 Lakhs against his fixed deposits at a 12% p.a. interest rate. He utilized ₹50,000 of the limit for 15 days to manage a working capital gap, keeping the rest untouched.
He calculated his daily interest charge: ₹50,000 * 12% / 365 = ₹16.44 per day. Over 15 days, his total interest expense was ₹246.58. He paid zero interest on the remaining ₹4.5 Lakhs of available credit.
Overdraft accounts charge interest only on the utilized amount for the exact number of days utilized, making them highly flexible for short-term needs.
Use overdraft lines for temporary cash flow crunches. Pay back the utilized principal quickly to keep daily interest charges from accumulating.
Frequently Asked Questions
How is overdraft interest calculated?
Overdraft interest is calculated daily on the utilized balance using the formula: Interest = (Utilized Balance * Interest Rate p.a.) / 365. The accumulated interest is debited monthly.
Do I pay interest if I don't use my overdraft?
No. You pay zero interest on the overdraft line if you do not utilize the credit. Interest is only charged on the utilized funds.
What are the benefits of an overdraft account?
It offers emergency liquidity, charges interest only on utilized cash, allows flexible repayments, and handles working capital fluctuations efficiently.
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