So I'm thinking on getting a overdraft in my bank, it says that the interest is 15% annually, however I only need little money to cover something before the end of this month, I can pay that amount in its entirety with October's salary without any issues, but what I don't have clear is how much interest would I be paying, the entire 15% or a fraction of it considering I would be paying it back right away?.

  • "I'm thinking on getting a overdraft in my bank" Huh? "how much interest would I be paying, the entire 15%" As you stated earlier in the question, "*the interest is 15% annually *". Thus, if you pay it back after a week, the interest rate would be 1/52 of 15%. – RonJohn Oct 21 '17 at 18:51
  • (1) What country is this? (2) Better to get a short-term loan, since banks look unkindly on overdrafts - it makes you an unreliable customer. – RonJohn Oct 21 '17 at 18:53
  • It's Denmark, danskebank. – Artemix Oct 21 '17 at 19:01
  • 2
    @RonJohn , you are thinking US. In Europe, ‘overdrafts’ are perfectly normal, and often replace credit cards. The amount of people having ‘permanent’ overdrafts is nearly like the amount of people in the US carrying credit card debt. – Aganju Oct 21 '17 at 20:08
  • @Aganju that's... interesting and completely unexpected! :) – RonJohn Oct 21 '17 at 20:14

It depends on your bank and the details in the agreement, but typically, interest is calculated daily. So if you borrow 1000 EUR for 1 day, you pay 15% * 1000 EUR * 1/360 = 42 Cent (41.666667 cent to be exact).

You can simply multiply these 42 cent up with the number of days you plan and the number of 1000s EUR. Note that weekend days count too, even if you cannot pay them back on the weekend.

The exact value will be very slightly different, as the interest is added monthly to the principal, and there is compound interest on the interest. Banks also often consider all months 30 days long for interest calculations.

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