1. What is Per Diem on Loan Payment?

Per diem (Latin for "per day") on loan payment refers to the daily interest amount calculated on a loan. It helps determine the exact amount of interest that accrues each day on the outstanding loan balance.

2. How Does the Calculator Work?

The calculator uses the per diem formula:

Where:

• \( Payment \) — Loan payment amount in USD
• \( Rate \) — Interest rate in decimal form (e.g., 0.05 for 5%)
• 365 — Number of days in a year (some calculations use 360)

Explanation: The formula calculates the daily interest amount by spreading the annual interest across each day of the year.

3. Importance of Per Diem Calculation

Details: Calculating per diem interest is crucial for understanding daily loan costs, especially when making early payments or during loan payoff calculations.

4. Using the Calculator

Tips: Enter the payment amount in USD and the interest rate as a decimal (e.g., 0.075 for 7.5%). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: Most consumer loans use 365-day years, while some commercial loans use 360. Check your loan terms for the correct divisor.

Q2: How is this different from APR?
A: APR (Annual Percentage Rate) includes fees and other costs, while per diem calculates just the daily interest portion.

Q3: When is per diem calculation most useful?
A: Particularly helpful when making extra payments or paying off a loan mid-month to calculate exact interest owed.

Q4: Does this account for compound interest?
A: This simple version calculates simple daily interest. For compound interest, the calculation would be more complex.

Q5: Can I use this for mortgage loans?
A: Yes, though mortgages often have specific per diem calculation methods - check with your lender for precise calculations.