How the comparison works
The overdraft is priced as an effective annual rate (EAR) turned into a monthly rate with (1 + EAR)^(1/12) − 1, spread over the days as 12 ÷ 365 of a year, on the amount above any interest-free amount. The loan is an equal-payment loan whose APR becomes a monthly rate on the effective basis by default, or divided by 12 if you choose that in the Loan APR convention field. The overdraft's EAR is always effective, because an EAR already is. On the default £1,000 example the loan payment is £173.57 on the effective basis and £174.03 divided by 12, and the loan's interest is £41.40 or £44.20. The loan also takes an optional fee paid in cash. The overdraft is assumed to stay at the full amount for every day you enter, because that is how banks' overdraft calculators work; the loan is repaid over its term.
Worked example: £1,000 for 30 days
An overdraft of £1,000 at 39.9% EAR for 30 days costs £27.99 in interest. A 6-month personal loan for the same £1,000 at 15% APR is £173.57 a month and £41.40 of interest in total, so the overdraft is cheaper by £13.41 for a month. The two cost the same at 44.4 days of borrowing, at £0.93 a day for the overdraft.
When the overdraft is dearer
For 90 days, the overdraft costs £83.96 against the loan's £41.40, so the loan is cheaper by £42.56. A loan at 39.9% APR over 6 months costs £101.63 in interest, the same rate as the overdraft but charged over the whole term.
What this calculator leaves out
It assumes the overdraft stays at the full amount for all the days, with the rate unchanged. If you would pay an overdraft down over the weeks, it overstates the overdraft's cost. A loan is borrowed for its whole term even if you repay early, and a real loan depends on your credit record. Unarranged overdrafts, account fees and a lender's right to withdraw an overdraft are not modelled.
To price an overdraft in more detail, with two balance bands and a monthly cap, use the overdraft interest calculator.
To compare two loans, use the loan comparison calculator.
Use the right country page
This page compares a UK overdraft with a personal loan in pounds. The country choices above the inputs open separate local pages. Choosing United States opens the US line of credit vs loan calculator, which uses dollars and simple daily interest on a line of credit. Inputs reset and amounts are not converted.
Inputs for the overdraft vs personal loan calculator
Amount you need
The amount you would borrow on the overdraft or as a loan.
Days overdrawn
How many days you would stay overdrawn by the full amount. A whole number up to 3,650.
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.
Loan rate (APR)
The APR of the personal loan you could take instead.
Loan APR convention
Applies to the loan APR only. The overdraft EAR stays effective. Effective APR (FCA) is the default and follows the FCA APR rule. APR divided by 12 is how many UK sites work and gives a slightly higher monthly rate.
Loan term
The months you would take to repay the loan. A whole number up to 120.
Loan arrangement fee
A percentage of the loan, paid in cash. Enter zero for none.
CALCULATOR QUESTIONS
UK overdraft vs personal loan calculator questions
Is an overdraft cheaper than a personal loan?
For a short need, often yes. £1,000 for 30 days costs £27.99 on a 39.9% EAR overdraft against £41.40 on a 6-month loan at 15% APR.
How long can I stay overdrawn before a loan is cheaper?
In the example, about 44.4 days. Beyond that the loan is cheaper.
Does an interest-free amount change it?
Yes. A £500 interest-free amount on £1,500 for 45 days cuts the overdraft cost to £41.98.
Do I include the loan fee?
Yes: enter any arrangement fee as a percentage. A 2% fee on a £1,000 12-month loan adds £20.00.
Are overdraft rates fixed?
No, they are usually variable, so the result is an estimate at today's rate.