Line of Credit Interest Calculator

About this calculator

A line of credit charges interest only on the portion of the credit limit that’s actually drawn and outstanding at any given time, not on the full approved limit — unlike an installment loan, where interest accrues on the full disbursed amount from day one. Interest typically accrues daily on the outstanding balance at the line’s variable or fixed annual rate, and is billed monthly.

Because the balance on a revolving line of credit changes as funds are drawn and repaid, interest owed for a period is calculated as (average daily outstanding balance × annual interest rate ÷ 365) × number of days in the period, rather than a fixed monthly payment figure like a term loan has. Businesses use lines of credit for working capital and cash flow gaps precisely because interest costs shrink automatically as the balance is paid down, unlike a lump-sum loan.