1. What is Daily Interest?

Daily interest is the amount of interest that accrues on a loan or investment each day. It's calculated based on the principal balance and the annual interest rate, divided by 365 days.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• Balance — Current loan or investment principal amount
• Annual Interest Rate — The yearly interest rate as a percentage
• 365 — Number of days in a year (some calculations use 360)

Explanation: The formula converts the annual rate to a daily rate by dividing by 365 days, then applies it to the current balance.

3. Importance of Daily Interest Calculation

Details: Understanding daily interest helps borrowers know how much interest accrues each day, which is particularly important for loans with daily compounding or when making extra payments.

4. Using the Calculator

Tips: Enter the current loan balance and annual interest rate (as a percentage, not decimal). The calculator will show the daily interest amount.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: Most modern loans use actual/365 day count. Some older loans (especially mortgages) may use 360-day years - check your loan terms.

Q2: Does this account for compounding?
A: This calculates simple daily interest. For compounding interest, the calculation would be more complex as each day's interest would be added to the principal.

Q3: How can I reduce my daily interest?
A: You can reduce daily interest by paying down the principal balance or negotiating a lower interest rate.

Q4: Is daily interest the same for every day?
A: With a fixed-rate loan and no balance changes, yes. With variable rates or changing balances, the daily interest will vary.

Q5: How does this relate to APR?
A: APR (Annual Percentage Rate) includes fees and other costs, while this calculation uses just the interest rate to determine daily accrual.