How overdraft interest is worked out
Banks quote an overdraft as an effective annual rate (EAR). The calculator turns it into a monthly rate with (1 + EAR)^(1/12) − 1, spreads that over the days as 12 ÷ 365 of a year each day, and charges it on the amount you are overdrawn above any interest-free amount. Interest = (amount − interest-free amount) × daily rate × days. That is the method that reproduces the bank examples below.
At 39.9% EAR the daily rate is 0.0933% of the chargeable amount. Interest is a simple sum over the days, so two bands of borrowing in a month are priced by adding the two together.
Worked example: £500 for 30 days at 39.9% EAR
HSBC's overdraft calculator tabulates the cost of £500 of an arranged overdraft on its Bank Account, with the first £25 interest-free and 39.9% EAR above it. The defaults here are those figures, and the result is £13.29 for 30 days. The same overdraft costs £3.10 for 7 days and £26.59 for 60 days; HSBC's table shows £3.10, £13.29 and £26.59. The interest-free amount saves £0.70 over the 30 days. The defaults are an example, not a recommendation: enter your own account's rate and interest-free amount.
Other banks' examples
Santander's table for £500 with a rate of 39.94% and no interest-free amount shows £3.27 for 7 days and £14.01 for 30. This calculator gives £3.27 and £14.01. For 60 days it gives £28.01 where Santander's page shows £28.12, so the 60-day figure is not matched.
NatWest's example is £1,000 for 20 days at 39.49% EAR: £18.49. Adding £200 for the same 20 days gives £22.19, matching the £22.19 on NatWest's page. Use the second band for any change in the amount you are overdrawn during the month.
A monthly cap
Some accounts cap the interest charged in a month; Santander's Choice account, for example, caps interest on an arranged overdraft at £30 a month when we checked its page. On £2,000 for 30 days at 39.9% with no interest-free amount, the uncapped interest would be £55.97. With a £30 cap it is £30.00, a saving of £25.97. For periods longer than 31 days the cap applies once for each block of up to 31 days.
What this calculator leaves out
It assumes the overdraft is drawn for the days you enter, with no other credits or debits, and that the rate stays the same. Overdraft rates are usually variable. It does not include account fees, unpaid item fees or the day interest is actually charged. Bank APR figures follow separate rules: for an overdraft the FCA's APR rules assume the full credit is drawn for the whole agreement, and for three months if the length is unknown. Your bank's own calculator and statement are the final word.
To compare the cost with a personal loan, use the overdraft vs personal loan calculator.
To price card borrowing instead, use the credit card interest calculator.
Use the right country page
This page prices a UK overdraft in pounds from an effective annual rate. The country choices above the inputs open separate local pages. Choosing United States opens the US overdraft fee and interest calculator, which prices a per-item fee and an overdraft line of credit in dollars. Inputs reset and amounts are not converted.
Inputs for the overdraft loan interest calculator
Amount overdrawn
The overdraft you use, as a positive amount. Include any part inside the interest-free amount.
Days overdrawn
How many days you stay overdrawn by this amount. A whole number up to 365.
Then overdrawn by
A second amount if your overdraft changes. Enter zero if it stays the same.
Days at the second amount
How many days you stay overdrawn by the second amount. A whole number up to 365.
Overdraft rate (EAR)
The effective annual rate from your bank, as a percentage. It is usually variable.
Interest-free amount
The part of the overdraft with no interest. Enter zero if your account has none.
Monthly cap on interest
The most your account charges in interest in a month. Enter zero for no cap.
CALCULATOR QUESTIONS
UK overdraft loan interest calculator questions
How much interest will my overdraft cost?
Interest = (amount − interest-free amount) × daily rate × days. £500 for 30 days at 39.9% EAR with £25 interest-free costs £13.29.
Why is the interest not simply the EAR divided by 365?
Because the EAR already includes compounding. Dividing it by 365 gives a higher figure than HSBC's £13.29 for the same 30 days, so it over-charges. The monthly-rate method here gives £13.29.
How much does an interest-free amount save?
On £500 for 30 days at 39.9% EAR, a £25 interest-free amount saves £0.70.
What if my overdraft changes during the month?
Use the second amount and its days. £500 for 20 days and £1,000 for 10 days at 39.9% with £25 interest-free costs £17.96.
Is the rate fixed?
No. Overdraft rates are usually variable, so the result is an estimate for today's rate.