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Joined: 15 Feb 2006
Posts: 0
1.20 Dollars($)
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Post subject: Daily Simple Interest |
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| How are you billed for a daily loan that charges daily simple interest if the loan is tied into an index that changes daily. How would you know what your actual payment would be by the due date? In trying to pay the interest early (putting more to principal),. |
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adonis
Joined: 22 Oct 2005
Posts: 4814
Location: ALASKA
269.19 Dollars($)
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Post subject: RE |
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To determine the amount of interest you will be required to pay on each month, use the following formula called the Simple Daily Interest formula:
Number of days since last payment x Principal Balance Outstanding x Interest Rate Factor
= Interest Amount
Example: Let's say the remaining balance on your loan is $9500.00. You sent in a payment of $160.00, 32 days after your previous month's payment. Your interest rate is 8.25% (interest rate factor is .00022587).
32 (days) x $9500.00 (PBO) x .00022587 (interest rate factor)
You would pay $68.66 toward interest and $91.34 toward the principal balance. This would leave you with a loan balance of $9408.66 after the $160.00 payment was applied.
I hope this will give you a fair idea about the calculation. |
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Samantha
Community Mentor
Joined: 16 Sep 2005
Posts: 1606
Location: MASSACHUSETTS
150.38 Dollars($)
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Hi Pat,
Welcome to MortgageFit Forums.
I shall give it a try to explain you the method of calculation but it's better if you take the help of a professional rather than trying yourself.
In simple interest loan your annual rate is divided by 365 and is thus converted into a daily rate. The daily rate is multiplied by the loan balance to calculate the interest that becomes due for the day.
The amount that is obtained as a result is recorded in a special accrual account, which increases by that amount every day. No interest gets accrued on this account.
After the receipt of the payment it is applied first to the accrual account and the left over is used to lower the balance. As the balance decreases, a new and smaller daily interest charge is calculated.
Looks a bit complicated? I think once you get the calculation done for your details with a professional it will be easier to you.
God bless you.
For MortgageFit,
Samantha
_________________
Know how to compare lenders with mortgage booklet |
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jameshogg
Joined: 20 Dec 2005
Posts: 5203
Location: nevada
651.69 Dollars($)
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Post subject: |
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Here you have a flat rate of interest that is not compounded and is usually expressed as an annual rate.
The calculation for one day of simple interest is
(loan balance x interest rate)/365 = daily amount of interest
James |
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Sanwar
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Post subject: Need Help |
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what is the formula to calculate interest rate factor.
Regards
Sanwar
"sanwar.singh@fiserv.co.in"
[Email address deactivated as per forum rules. Thanks.] |
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larry
Joined: 27 Jun 2007
Posts: 3328
474.61 Dollars($)
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Post subject: |
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Hi Sanwar,
If we consider the principal amount to be P, the number of years to be n, the annual interest rate to be i, then we can find out the amount to be received after the specified n years by using the formula:
A = P(1+ni). Here A is indicated as the amount to be received.
Now, to calculate the interest rate i, we can use the following formula:
i = ([A/P]-1)/n. |
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mike112
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Post subject: |
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| larry could you please give an example? |
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adonis
Joined: 22 Oct 2005
Posts: 4814
Location: ALASKA
269.19 Dollars($)
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Post subject: |
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Mike,
You can refer to my post above for the calculation of interest.
_________________
Procrastination is the enemy of your financial success |
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Joanne Kent
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Post subject: daily simple interest |
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| Is "daily simple interest" in my best interest, versus a regular fixed annual rate? |
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helping_user
Joined: 31 Mar 2006
Posts: 815
Location: Hawaii
155.59 Dollars($)
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Post subject: RE: daily simple interest vs fixed annual rate |
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Welcome Joanne.
Whether daily simple interest is better or not, will depend more upon how much you can pay, your loan amount, the current rate offered in both simple interest and annual interest rate types etc. By the way, are you talking about your mortgage? can you give me some more details of your loan so that i can give you a better idea.
Thanks. |
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chloejoanna
Joined: 20 May 2008
Posts: 37
16.09 Dollars($)
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Post subject: |
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Although the formulas posted are useful, you would be best getting a proffesional to look at your debt. Nothing worse than miscalculation leading to money dificulties.
_________________
http://www.ezylet.co.uk/ the property rental network. |
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O'Connor
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Post subject: calculations |
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| I have plugged numbers in each of the calculations above and none of them come out right? in the opening example daily rate is annual rate divided by 365. if the annual rate is 8.5% then the daily rate would be .00023287 but you use .00022585 as the interest rate factor. why the difference? |
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O'Connor
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Post subject: calculations |
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| it doesn't look like larry's answer has anything to do with Sanwar's question. Sanwar asked how to calculate interest rate factor and larry's answer has to do with "the amount to be received after the specified years". usually i can follow these things but even adonis' example 8.25% divided by 365 is .00022602 not the number he used for interest rate factor .00022587. |
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Mac_7
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Post subject: |
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| well O'Connor, can you recalculate the figures here? |
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oconnor
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Post subject: calculation |
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| i am not the teacher but the student. i am trying to understand. |
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