A Mn–Zn ferrite magnetic fluid (TCF-56) having 5.6 mT fluid magnetization and high pyromagnetic co-efficient, (∂M/∂T = 177 A/m K) has been investigated as a coolant in a 3 kW prototype transformer for overloading condition (167%). The winding temperature of a transformer submerged in magnetic fluid reaches at 396.8 K after 3 h of overloading, which is 20 K lower, when the same experiment was carried out with pure transformer oil. Similarly, core and top oil temperature also decrease by 14 and 21 K, respectively, when TCF-56 is used. This cooling performance of TCF-56 attributes to the thermo-magnetic convection, which sets up due to the significant change in magnetization of the fluid with increasing temperature. This can be explained using the Rayleigh number. The normal life of a transformer under 167% overloading condition is calculated for pure oil and TCF-56. The result shows nine times increase in normal life expectancy in TCF-56 fluid compared to use of pure oil. The study leads to the conclusion that Mn–Zn ferrite magnetic fluid (TCF-56) used in a transformer can deliver more power than its nameplate rating with an improved normal life.