What Is a Daily Simple Interest Loan?
A daily simple interest loan charges interest based on the outstanding principal each day rather than on a fixed monthly schedule. Many personal loans, auto loans, and short-term lending products use this method. Because interest is calculated per day, the total cost of borrowing depends directly on how many days the balance is outstanding — paying early saves money, while paying late adds cost.
How to Use This Calculator
Enter three values: the loan principal (the amount borrowed), the annual interest rate as a percentage, and the number of days the loan is outstanding. The calculator returns the daily interest charge, the total interest accrued over the period, and the full payoff amount (principal plus interest).
The Formula Explained
Daily interest is found by dividing the annual rate by 365 to get a daily rate, then multiplying by the principal:
$$\text{Daily interest} = \text{Principal} \times \left(\text{annual rate} \div 365\right)$$
Total interest is the daily interest multiplied by the number of days, and the payoff is the principal plus that total interest. This assumes a 365-day year and that the principal does not change over the period.
$$\text{Total Interest} = \text{Principal} \times \frac{\text{Annual Rate (\%)}}{100 \times 365} \times \text{Days}$$$$\text{Payoff} = \text{Principal} + \text{Total Interest}$$
Worked Example
Suppose you borrow $10,000 at a 6% annual rate for 30 days. The daily rate is \(0.06 \div 365 = 0.00016438\). Daily interest = \(10{,}000 \times 0.00016438 = \$1.6438\). Over 30 days, total interest = \(1.6438 \times 30 = \$49.32\). The payoff amount is \(10{,}000 + 49.32 =\) $10,049.32.
FAQ
Does this use compound interest? No. This is simple interest — interest is calculated only on the original principal, not on previously accrued interest.
Why divide by 365? Most lenders use a 365-day year for daily interest accrual. Some use 360 days; check your loan agreement for the exact convention.
How can I reduce the interest I pay? Pay off the balance sooner. Since interest accrues each day, fewer outstanding days means less total interest.
