It pays to know what your daily interest rate is. This figure represents the amount of interest that you are being charged daily for a loan, such as a mortgage, car note, home equity loan or a credit card. Once you know what your daily interest rate is, you can use it to calculate your annual percentage rate. Your cost of funds borrowed yearly is expressed as a percentage called the annual percentage rate. You can use an annual percentage rate to see how much you will pay, in finance charges, over the life of a loan.
- Skill level:
Other People Are Reading
Determine the daily rate and multiply it by your balance. If your daily interest rate is .0005 and your balance is £3,250, multiply the two. The answer is £1.6, which represents the amount of interest that you are paying daily on a loan balance of £3,250. If your daily interest rate increases to .0006, your daily interest increases to £1.90.
Multiply the daily interest rate by the number of days in a year. Multiply .0005 by 360 and you get .18, or 18 per cent, which represents the annual percentage rate. If you multiply £3,250 by .18, you get £585, which is the amount of finance charges you will pay in a year. This type of calculation always assumes every month has 30 days (30 x 12 = 360).
Reverse the procedure to get your daily interest rate. Take the interest rate of .18 and divide by 360 to get your daily interest rate. Most people compare the cost of funds borrowed by using the annual percentage rate. If you are using the daily interest rate factor, you may not know exactly how much you are paying to borrow money.
Tips and warnings
- Note that some lenders use 360 while others use 365 for the number of days in a year for the calculations.
- 20 of the funniest online reviews ever
- 14 Biggest lies people tell in online dating sites
- Hilarious things Google thinks you're trying to search for