1. What is Daily Interest?

Daily interest is the amount of interest that accrues on a loan or credit balance each day. It's calculated based on the annual percentage rate (APR) divided by 365 days.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( Balance \) — Current loan or credit balance in dollars
• \( APR \) — Annual Percentage Rate (percentage)

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 estimate how much interest accrues between payments, compare loan costs, and make informed decisions about repayment strategies.

4. Using the Calculator

Tips: Enter your current loan balance in dollars and the APR as a percentage (e.g., enter 5 for 5%). All values must be valid (balance > 0, APR ≥ 0).

5. Frequently Asked Questions (FAQ)

Q1: Is APR the same as interest rate?
A: APR includes both the interest rate and any additional fees, providing a more complete picture of borrowing costs.

Q2: Why divide by 365 instead of 360?
A: Most modern financial institutions use actual/365 day count convention, though some may use 360 - check your loan terms.

Q3: How does daily interest compound?
A: This calculator shows simple daily interest. For compounding interest, the calculation would be more complex.

Q4: Does this work for credit cards?
A: Yes, credit card interest is typically calculated daily, though there may be grace periods or minimum interest charges.

Q5: How can I reduce daily interest charges?
A: Making larger payments, paying more frequently, or negotiating a lower APR can all reduce daily interest accrual.