1. What is Daily Interest Factor?

The Daily Interest Factor is a decimal value representing the daily portion of an annual interest rate. It's used to calculate daily interest accrual on loans, savings accounts, and other financial products.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• \( rate \) — Annual interest rate (as a percentage)
• 365 — Number of days in a year (some calculations use 360 for simplicity)

Explanation: The formula converts the annual percentage rate to a daily decimal factor by dividing by both 100 (to convert from percentage) and 365 (to get daily rate).

3. Importance of Daily Interest Factor

Details: The daily factor is essential for accurate daily interest calculations, compound interest computations, and understanding how interest accrues over time on financial products.

4. Using the Calculator

Tips: Enter the annual interest rate as a percentage (e.g., enter 5 for 5%). The calculator will automatically convert it to decimal form and divide by 365 days.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: 365 is more accurate for actual daily calculations. Some financial institutions use 360 for simplicity, which results in slightly higher daily rates.

Q2: How is this different from APR?
A: APR is the annual rate. The daily factor is what portion of that rate applies each day.

Q3: Can I use this for compound interest calculations?
A: Yes, the daily factor is often used as the base for daily compounding calculations.

Q4: What's a typical daily factor value?
A: For a 5% annual rate, the daily factor would be about 0.000136986 (5%/365).

Q5: Does this account for leap years?
A: This basic calculation uses 365 days. For precise calculations, you might use 365.25 or actual days in the year.