1. What is Daily Loan Interest?

Daily loan interest is the amount of interest that accrues on a loan each day. It's calculated based on the principal amount, annual interest rate, and the number of days the loan is outstanding.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

Where:

• \( Principal \) — Original loan amount ($)
• \( Rate \) — Annual interest rate (as percentage)
• \( Days \) — Number of days interest is calculated for

Explanation: The formula first converts the annual rate to a daily rate by dividing by 365 days, then multiplies by the principal and number of days.

3. Importance of Interest Calculation

Details: Understanding daily interest helps borrowers estimate costs between payments, compare loan options, and make informed financial decisions.

4. Using the Calculator

Tips: Enter the principal amount in dollars, annual interest rate as a percentage (e.g., 5 for 5%), and number of days. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 in the formula?
A: This converts the annual rate to a daily rate by assuming a 365-day year (actual/365 convention).

Q2: Does this work for compound interest?
A: No, this calculates simple daily interest. Compound interest would require a different formula.

Q3: What about leap years?
A: Most financial institutions use 365 days even in leap years, but some may use 366 - check your loan terms.

Q4: Can I use this for credit cards?
A: Credit cards typically use average daily balance methods which are more complex than this simple calculation.

Q5: How accurate is this calculation?
A: This provides a good estimate, but actual loan interest may vary based on specific terms and rounding methods.