1. What is Per Diem On Loan Payoff?

Per diem on loan payoff refers to the daily interest amount that accrues on a loan balance. It's used to calculate the exact amount of interest owed when paying off a loan between scheduled payment dates.

2. How Does the Calculator Work?

The calculator uses the per diem formula:

Where:

• \( Balance \) — Current loan balance in USD
• \( Rate \) — Annual interest rate in decimal form

Explanation: The formula calculates the daily interest by multiplying the balance by the annual rate, then dividing by 365 days.

3. Importance of Per Diem Calculation

Details: Accurate per diem calculation ensures proper loan payoff amounts, prevents overpayment or underpayment, and helps with financial planning when paying off loans early.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: Most consumer loans use actual/365 day count convention, though some commercial loans use 360. Check your loan terms.

Q2: Does this account for compounding interest?
A: This calculates simple daily interest. For compound interest, the calculation would be more complex.

Q3: How accurate is this for partial month payoffs?
A: Very accurate as it calculates the exact daily interest amount regardless of month length.

Q4: Can I use this for mortgage payoffs?
A: Yes, this works for any simple interest loan including mortgages, auto loans, and personal loans.

Q5: What if my loan uses 365/366 for leap years?
A: For maximum precision in leap years, divide by 366 if the payoff period includes February 29.