How is interest on a daily simple interest loan calculated?
Interest on a daily simple interest loan is calculated by using the daily simple interest method. This means that interest accrues on a daily basis on the amount of the loan (current outstanding principal balance) from the date the interest charges begin until you repay the loan. The daily simple interest method counts the number of days between the date your last payment is received and the date your current payment is received.
How does the daily simple interest calculation work?
Principal Balance X (Annual Interest Rate* / Year Count**) X Number of Days Since Last Payment
*Please refer to your loan documents. ** Year count refers to a 360 or 365 year that applies to the loan and this number can vary. The example shown above is for illustrative purposes only and is not meant to reflect actual interest due on any particular loan.
$6,000 X (24.36% / 365) X 31 = $124.13
Standard Monthly Payment Amount – Monthly Interest Due
$173.86 – $124.13
Amount Paid to Principal Balance $49.73
New Principal Balance $5,950.27
The following is an example of six months of payments.*
| Payment Date | Payment Amount | Amount of Monthly Interest Due | Amount Applied To Interest | Amount Applied To Principal | Unpaid Accrued Interest | Principal Balance |
|---|---|---|---|---|---|---|
| 12/15/19 | $6,000.00 | |||||
| 1/15/20 | $173.86 | $124.13 | $123.11 | $49.73 | $0.00 | $5,950.27 |
| 2/15/20 | $173.86 | $123.11 | $110.24 | $50.75 | $0.00 | $5,899.52 |
| 3/15/20 | $173.86 | $110.24 | $120.74 | $63.62 | $0.00 | $5,835.90 |
| 4/15/20 | $173.86 | $120.74 | $115.78 | $53.12 | $0.00 | $5,782.78 |
| 5/15/20 | $173.86 | $115.78 | $118.44 | $58.08 | $0.00 | $5,724.70 |
| 6/15/20 | $173.86 | $118.44 | $123.11 | $55.42 | $0.00 | $5,669.28 |
When you make your standard payments by your due date, you will notice the following:
- Your payments will satisfy the interest that is due and will allow for principal reduction each month.
- You will avoid additional interest charges.
- You will avoid late fees (where applicable).
- Your account is paid off as scheduled.
*The information provided in the above example is for illustrative purposes only and is not meant to reflect actual interest due for any particular loan.
