1. What is Per Diem in Loans?

Per diem (Latin for "per day") in loans refers to the daily interest amount charged on a loan. It represents the cost of borrowing money for a single day.

2. How Does the Calculator Work?

The calculator uses the per diem formula:

Where:

• \( Loan \) — Principal loan amount in USD
• \( Rate \) — Annual interest rate in decimal form
• 365 — Number of days in a year (some calculations use 360)

Explanation: The formula calculates the daily interest by dividing the annual interest by 365 days.

3. Importance of Per Diem Calculation

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

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

Q1: Why is per diem important?
A: It helps borrowers understand the daily cost of their loan, especially useful for short-term loans or when making early payments.

Q2: Should I use 365 or 360 days?
A: Most calculations use 365 days, but some financial institutions use 360 days (which results in slightly higher daily interest).

Q3: How does per diem relate to APR?
A: APR (Annual Percentage Rate) is the annual rate, while per diem shows the daily equivalent of that rate applied to your loan balance.

Q4: Does per diem change over time?
A: For simple interest loans, per diem decreases as principal is paid down. For compound interest loans, it may vary based on the terms.

Q5: Can I use this for mortgage loans?
A: Yes, this calculation works for any type of loan, though mortgage interest may be calculated differently depending on the terms.