1. What is Daily Interest Rate?

The daily interest rate is the interest charged on a loan or earned on an investment calculated on a daily basis. It's derived by dividing the annual interest rate by 365 (number of days in a year).

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• Annual Interest Rate — The yearly interest percentage charged on the loan
• 365 — Number of days in a year (some calculations may use 360 for simplicity)

Explanation: This calculation converts the annual percentage rate (APR) into a daily rate that can be used to calculate interest accruing daily.

3. Importance of Daily Rate Calculation

Details: Knowing the daily interest rate helps borrowers understand how much interest accrues each day on their loan balance, which is particularly important for loans with daily compounding interest or short-term loans.

4. Using the Calculator

Tips: Enter the annual interest rate as a percentage (e.g., enter 5 for 5%). The calculator will automatically compute the daily rate.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: Most modern financial calculations use 365 days for greater accuracy, though some institutions still use 360 days for simplicity.

Q2: How does this relate to compound interest?
A: For daily compounding, the daily rate is applied to the current balance each day, including previously accrued interest.

Q3: Is the daily rate the same as APR?
A: No, APR is the annual rate. The daily rate is the APR divided by 365.

Q4: How accurate is this calculation?
A: This provides a basic daily rate. Actual loan calculations may include additional factors like fees or different compounding methods.

Q5: Can I use this for credit card interest?
A: Yes, credit cards typically use a daily periodic rate calculated this way, though they may have additional terms.