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Daily Interest Formula:
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Daily interest represents the amount of interest that accrues on a principal amount each day, calculated by dividing the annual interest rate by 365 days. This calculation is essential for understanding the true cost of loans, credit cards, and other financial products.
The calculator uses the daily interest formula:
Where:
Explanation: This formula calculates the per-day interest accrual by converting the annual rate to a daily rate and applying it to the principal amount.
Details: Understanding daily interest costs helps borrowers make informed financial decisions, compare loan products, and manage debt more effectively. It's particularly important for credit cards and loans with daily compounding interest.
Tips: Enter the principal amount in your local currency and the annual interest rate as a percentage. Both values must be positive numbers (principal > 0, annual rate ≥ 0).
Q1: Why calculate daily interest instead of monthly?
A: Daily interest calculations provide more precise results and are essential for understanding the true cost of products with daily compounding, such as credit cards.
Q2: Does this calculator account for compounding?
A: This calculator shows simple daily interest. For compound interest, the calculation would be more complex and depend on the compounding frequency.
Q3: What's the difference between APR and daily rate?
A: APR (Annual Percentage Rate) is the yearly rate, while the daily rate is APR divided by 365, showing how much interest accrues each day.
Q4: Should I use 365 or 360 days for calculation?
A: Most financial institutions use 365 days for daily interest calculations, but some may use 360. This calculator uses 365 for standard accuracy.
Q5: How can I reduce my daily interest costs?
A: You can reduce daily interest by paying down principal faster, negotiating lower interest rates, or consolidating high-interest debt.