1. What is Per Diem Interest?

Per diem interest is the daily interest charged on a loan. For vehicle 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
• 365 — Number of days in a year

Explanation: The formula calculates how much interest accrues daily by spreading the annual interest across all days of the year.

3. Importance of Per Diem Calculation

Details: Understanding per diem interest helps borrowers estimate daily costs during loan processing, compare loan offers, and plan for first payment amounts.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Why is per diem important for vehicle loans?
A: It helps borrowers understand daily interest costs between loan funding and first payment, which can be significant for large loans.

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

Q3: Is 365 days always used in the calculation?
A: Some lenders use 360 days for simpler calculations, but 365 is more accurate and commonly used.

Q4: Does per diem change during the loan term?
A: Yes, as you make payments and reduce the principal, the daily interest amount decreases.

Q5: Can I reduce per diem costs?
A: Making larger down payments, negotiating lower rates, or making early payments can reduce per diem costs.