Get Overdraft Loan up to 50L
Pay Interest Only When Used
About Overdraft Loan
An overdraft is a revolving credit limit rather than a loan disbursed in one shot. The lender sanctions a ceiling, you draw only what you need, and interest accrues daily on the outstanding balance — not on the sanctioned limit. Repay, and the headroom is restored for reuse.
The facility comes in two shapes. A regular overdraft holds the limit constant for the sanction period. A dropline overdraft reduces the limit on a fixed monthly schedule, so the ceiling steps down even in months when you draw nothing — which is what most unsecured overdrafts in India are.
This structure suits lumpy, unpredictable cash needs: seasonal stock, a delayed receivable, a payroll gap. It suits a known one-time expense far less well, because a term loan at a fixed rate is usually cheaper when the full amount stays drawn for the entire tenure.
Overdraft Eligibility and Facility Terms
How limits are sanctioned, reviewed and renewed on a revolving credit line.
| Parameter | Typical Terms | Details & Notes |
|---|---|---|
| Who can apply | Salaried, self-employed and business entities | Salaried applicants are usually sanctioned against salary credit, businesses against turnover. |
| Applicant age | 21 to 65 years | Assessed at the end of the sanction period rather than at drawdown. |
| Income / turnover floor | ₹25,000 net monthly salary or ₹40 Lakh turnover | Cash-flow evidence weighs more here than headline income, because the limit is a standby facility. |
| Facility type | Regular or dropline overdraft | A regular OD holds the limit flat. A dropline OD reduces it on a fixed monthly schedule — most unsecured ODs in India are dropline. |
| Sanctioned limit | ₹50,000 to ₹50 Lakh | Sized on average bank balance and credit summations over the preceding 6 to 12 months. |
| Interest charge | Daily, on the utilised balance only | Nothing accrues on undrawn headroom. Interest is debited to the account monthly. |
| Repayment | No fixed EMI on a regular OD | Interest is serviced monthly; principal is repaid whenever cash allows. A dropline OD must stay within its stepping-down limit. |
| Renewal | Annual review of the limit | Limits are enhanced, held or trimmed based on utilisation and account conduct during the year. |
| Charges to check | Processing and annual renewal fee | An unused line accrues no interest, but a renewal or maintenance fee may still apply. Confirm this in the sanction letter. |
| Lending authority | 40+ partner Banks & NBFCs | Underwriting, final approval, interest rate and disbursal are decided by the lender, not by LoanLogic. |
How Overdraft Interest Is Actually Charged
Interest accrues on the daily closing balance you have drawn, not on the limit you were sanctioned. On a ₹10 Lakh limit at 14% p.a., what you pay depends entirely on how much you draw and how long it stays out.
| Amount drawn | Days outstanding | Interest for the period | Cost as % of the ₹10 Lakh limit |
|---|---|---|---|
| ₹0 | — | ₹0 | 0% |
| ₹1,00,000 | 15 days | ≈ ₹575 | 0.06% |
| ₹3,00,000 | 20 days | ≈ ₹2,301 | 0.23% |
| ₹5,00,000 | 45 days | ≈ ₹8,630 | 0.86% |
| ₹10,00,000 | 90 days | ≈ ₹34,521 | 3.45% |
- The arithmetic is amount × rate × days ÷ 365. A ₹3 Lakh drawdown for 20 days at 14% costs 3,00,000 × 0.14 × 20 ÷ 365 ≈ ₹2,301, and nothing accrues on the ₹7 Lakh left undrawn.
- Against a term loan this reverses once the money stays out: keeping the full limit drawn for a year costs roughly the same interest as a term loan at the same rate, but without the discipline of a reducing principal.
- On a dropline overdraft the limit itself steps down every month whether or not you draw, so headroom you were counting on later may not be there.
- An unused line accrues no interest, but many lenders still levy an annual renewal or maintenance fee. Check that line in the sanction letter before treating the facility as free to hold.
Worked at a flat 14% p.a. for illustration. Actual rates, day-count conventions and fees are set by the lender.
Why a Revolving Limit Instead of a Term Loan
Draw what you need, pay interest by the day, repay whenever cash allows.
What Decides Your Overdraft Limit
Limits are sized on banking conduct and cash-flow evidence, then reviewed each year against how you actually used the line.
Monthly Cash Flow & Bank Balance
Regular credit transactions and average monthly bank balances are key evaluation metrics for overdraft limits.
Personal / Business Credit Profile
A strong credit score ensures higher pre-approved revolving line limits with minimal margin requirements.
Repayment & Utilization Record
Responsible credit line usage without defaults leads to limit enhancements and lower interest rates.
Income / Revenue Proof
Salaried income slips or business bank statements for past 6 months to establish borrowing capacity.
Clean Banking Track Record
Absence of cheque bounces or unhandled EMI bounces in your primary bank account.
Overdraft Interest Calculator
An overdraft has no fixed EMI. Work out what a drawdown actually costs, and compare it against a term loan for the same amount.
Indicative Calculation Notice: Interest is worked as amount × rate × days ÷ 365 for planning purposes. Day-count convention, compounding, renewal and non-utilisation fees vary by lender, and the sanctioned limit, rate and charges are determined solely by partner Banks and NBFCs.
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Ready to set up a standby credit line?
Compare regular and dropline overdraft limits up to ₹50 Lakhs across 40+ partner Banks and NBFCs.