1. What Is Daily Interest Rate?

The daily interest rate represents the interest charged or earned per day, calculated by dividing the annual interest rate by 365 days. This calculation is fundamental in various financial applications including loans, savings accounts, and investments.

2. How Does The Calculator Work?

The calculator uses the simple daily interest rate formula:

Where:

• \( \text{Annual Rate} \) — Annual interest rate in percentage (%)
• \( 365 \) — Number of days in a year
• \( \text{Daily Rate} \) — Resulting daily interest rate in percentage (%)

Explanation: This formula converts an annual percentage rate into its equivalent daily rate by distributing the annual rate evenly across all days of the year.

3. Importance Of Daily Interest Rate Calculation

Details: Calculating daily interest rates is essential for understanding the true cost of borrowing or the actual earnings on investments. It's particularly important for loans and credit products where interest compounds daily, and for comparing different financial products with varying compounding periods.

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 corresponding daily rate. Ensure the annual rate is a non-negative number for accurate results.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: While some financial institutions use 360 days for simplicity, dividing by 365 provides a more accurate daily rate calculation as it reflects the actual number of days in a year.

Q2: How does daily interest affect compound interest?
A: When interest compounds daily, the daily rate determines how much interest is added to the principal each day, which then earns additional interest in subsequent days, leading to faster growth.

Q3: Is this the same as APR to daily rate conversion?
A: Yes, this calculation converts Annual Percentage Rate (APR) to a daily rate, though some loans may have different compounding methods that affect the actual daily cost.

Q4: Can I use this for credit card interest calculations?
A: Yes, credit card companies typically use daily periodic rates calculated from the APR divided by 365 to determine daily interest charges.

Q5: What's the difference between simple and compound daily interest?
A: This calculator provides the simple daily rate. For compound interest, the daily rate is applied to the growing principal balance each day, while simple interest applies only to the original principal.