1. What is Per Diem Interest?

Per diem interest is the daily interest charge on a loan. For car loans, it represents the amount of interest that accrues each day before regular payments begin.

2. How Does the Calculator Work?

The calculator uses the per diem formula:

Where:

• \( Loan \) — The principal loan amount in USD
• \( Rate \) — The annual interest rate in decimal form (e.g., 0.05 for 5%)
• 365 — Number of days in a year

Explanation: The formula calculates how much interest accrues daily on your car loan before payments begin.

3. Importance of Per Diem Calculation

Details: Knowing your per diem helps you understand daily interest costs, especially important when timing your first payment or considering early payoff.

4. Using the Calculator

Tips: Enter loan amount in USD and interest rate as a decimal (e.g., 0.05 for 5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why calculate per diem interest for a car loan?
A: It helps you understand daily interest costs, which is useful when timing your first payment or considering early payoff strategies.

Q2: How does per diem affect my first payment?
A: Your first payment may be higher as it includes interest accrued from the loan origination date to your first payment date.

Q3: Is per diem calculated differently for leap years?
A: Some lenders use 365 days, others use 360, and some may adjust for leap years. Check with your lender for their specific method.

Q4: Can per diem help me save on interest?
A: Yes, by making payments earlier in the month or making additional principal payments, you can reduce daily interest accrual.

Q5: Does per diem change over the life of the loan?
A: It decreases as you pay down principal, unless you have a variable interest rate that changes.