1. What is Per Diem Rate?

The per diem rate is the daily interest rate calculated by dividing the annual rate by 365 days. It's commonly used in loan calculations to determine daily interest charges.

2. How Does the Calculator Work?

The calculator uses the simple formula:

Where:

• Annual Rate — The yearly interest rate in decimal form (e.g., 0.05 for 5%)
• 365 — Number of days in a year

Explanation: This calculation provides the daily interest rate by evenly distributing the annual rate across all days of the year.

3. Importance of Per Diem Calculation

Details: Knowing the per diem rate helps borrowers understand daily interest costs, compare loan options, and calculate precise interest for partial periods.

4. Using the Calculator

Tips: Enter the annual interest rate in decimal form (e.g., 0.075 for 7.5%). The rate must be greater than 0.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 instead of 360?
A: While some institutions use 360 days, this calculator uses 365 for more precise daily calculations in most standard loan agreements.

Q2: How is per diem rate used in loans?
A: It's multiplied by the principal balance and number of days to calculate interest between payments or for partial periods.

Q3: Does this account for compound interest?
A: No, this calculates simple daily interest. Compound interest requires more complex calculations.

Q4: What's a typical per diem rate range?
A: For a 5% annual rate, per diem would be about 0.00013699; for 10%, about 0.00027397.

Q5: Can I use this for daily compounding?
A: This gives the simple daily rate. For compounding, you'd need to use (1 + rate)^(1/365) - 1.