calc / business loan / OD
Overdraft / CC Interest
An overdraft charges interest only on what you've drawn, computed daily and debited monthly. Enter how your utilisation moved and see the bill the way the bank's system builds it.
Bill a month of utilisation daily product method
§1How OD/CC interest is billed
Unlike an EMI loan, there's no fixed instalment — you pay interest only for the days and the amount you actually used. That flexibility is the product; the pricing games around it are the catch.
§2The gotchas
Every rupee swept into the account reduces that day's outstanding — and that day's interest. Route collections into the CC account and pay suppliers from it as late as terms allow; the float is free interest saved.
Many banks charge 0.25–0.5% on the un-utilised portion if average utilisation is low (often below 50–60%). A limit far larger than you use can cost money twice — fee on the idle part, renewal fee on the whole.
The month-end interest debit increases your outstanding; next month you pay interest on it. Service the interest promptly — 90 days unserviced and the account turns NPA.
For CC against stock, the usable limit is recalculated monthly from your stock statement minus margin. Miss a stock statement and drawing power can drop below what you've drawn — triggering penal interest on the excess.
§3Related
Fixed capex is cheaper on a term loan; check what your cash flow supports on eligibility.