The limit is permission to borrow
This guide concerns a South Korean revolving credit line linked to a bank account, commonly called a minus account. You can draw money up to an agreed limit and repay it. The limit does not arrive in your account as money you own. This is an arranged lending facility; overdraft charges in other countries can work differently.
While your own deposited money covers your spending, you have not drawn on the loan. Borrowing begins when you spend beyond that money. Check whether the app’s available-to-withdraw amount includes unused credit.
Our fictional limit is 10,000,000 won, and the opening amount borrowed is 0 won. We then borrow 1 million won. The limit, rate and transactions are invented for the explanation, not terms offered by a particular bank. KRW is the currency code for Korean won.
One day with 1 million won borrowed costs 200 won
Assume a constant annual rate of 7.3% and a 365-day year. Multiply the principal used for that day’s interest calculation by the annual rate, then divide by 365.
1,000,000 won × 0.073 ÷ 365
= 200 won
The decimal form of 7.3% is 0.073. Putting the entire 10 million won limit into this calculation would incorrectly treat the unused 9 million won as borrowed money.
| Stage | Principal used for interest | Daily interest |
|---|---|---|
| After borrowing | 1,000,000 | 200 |
| After partial repayment | 600,000 | 120 |
| After repaying principal | 0 | 0 |
The unused part of the limit incurs no interest in this example. The credit agreement still exists, and any separate charges depend on its terms.
Repay some after ten days, then the rest ten days later
Borrow 1 million won on day 1. Pay back 400,000 won on day 11 and the remaining 600,000 won on day 21. Assume there are no other transactions and that interest is settled separately after this 30-day period.
The table assumes these amounts are the principal used for each day’s interest calculation. It does not claim that every bank uses only a day’s closing balance.
| Period | Principal used for interest | Interest in that period |
|---|---|---|
| Days 1–10 | 1,000,000 | 2,000 |
| Days 11–20 | 600,000 | 1,200 |
| Days 21–30 | 0 | 0 |
The first ten days cost 200 won a day; the next ten cost 120 won a day. No principal remains for the final ten days. Adding the interest gives 2,000 + 1,200 + 0, or 3,200 won for the full 30 days.
Keeping the full 1 million won borrowed for all 30 days would cost 200 × 30, or 6,000 won. The two repayments reduce the bill by 2,800 won. Both how much you repay and when you repay it determine the difference.
For a loan with a scheduled monthly repayment, see the equal-principal and equal-payment examples.
Zero principal can still leave interest to pay
On day 21, all the borrowed principal has been repaid. But the 3,200 won built up over the previous 20 days has not yet been paid. Our example settles it after day 30. Repaying principal does not erase interest already accrued.
For a real loan, check when and how interest is collected. Depending on the contract, it may be debited from a linked account or added to the amount borrowed. If an interest debit creates a new loan balance, later interest calculations also change.
The final ten days cost zero in the example because no principal remains for those days and no interest debit has yet occurred.
A same-day repayment may still leave interest
Borrowing and repaying on the same day can generate interest under the agreement’s daily balance rules. Whether it takes account of the highest amount used during the day, and when transactions are processed, can affect the calculation. A same-day deposit alone does not establish that the charge will be zero.
The 7.3% rate and 365-day basis belong to this example. A real statement also depends on rate changes, the treatment of a leap year and the handling of fractions of a won. The time it takes for a policy-rate cut to reach your loan can depend on your contract.
After repayment, check whether the agreement has ended
Reducing the borrowed principal to zero and closing the credit agreement are separate steps. While the agreement remains active, its terms may allow further borrowing. Renewal at maturity, or retention of the same limit, is not guaranteed.
- Principal and unpaid interest: look beyond the displayed principal balance for any interest still to settle.
- Interest payment date and account: check when and where the debit will occur, and whether the necessary money is available.
- Maturity and repayment terms: check the end date, renewal review and any repayment required if the limit changes.
- Closure when you no longer need it: after settling principal and interest, confirm that the credit agreement has ended.
About the examples
This is an invented transaction with a 10 million won limit and zero opening principal. It draws 1 million won on day 1, repays 400,000 won on day 11 and repays 600,000 won on day 21. The assumed daily principal for interest is 1 million won on days 1–10, 600,000 won on days 11–20 and zero on days 21–30. Each range includes both endpoints and lasts ten days.
The annual rate stays at 7.3% for all 30 days, using simple interest and a 365-day basis. There are no interest debits, extra borrowing or other transactions during the period; the accrued 3,200 won is settled after day 30. Separate fees, overdue payments, additional intraday use and rounding are excluded. The tables do not reproduce a bank’s product or calculation method. How we write and check our guides