Loan Calculator Daily Interest Amortization

Daily Interest Amortization Formula:

\[ A = P \times (1 + r/365)^{d} \]

Principal Amount (P):

currency

Annual Interest Rate (r):

decimal

Number of Days (d):

days

EMI (Installment):

currency

Adjusted Total Amount (A):

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1. What is Daily Interest Amortization?

Daily Interest Amortization calculates the total amount to be repaid on a loan where interest is compounded daily. It accounts for the effect of daily compounding on the principal amount over a specific period.

2. How Does the Calculator Work?

The calculator uses the daily interest formula:

\[ A = P \times (1 + r/365)^{d} \]

Where:

\( A \) — Total amount after interest (currency)
\( P \) — Principal amount (currency)
\( r \) — Annual interest rate (decimal)
\( d \) — Number of days (integer)

Explanation: The formula calculates the future value of a loan with daily compounding interest, then adjusts for the EMI payment.

3. Importance of Daily Interest Calculation

Details: Daily interest calculation provides a more accurate representation of loan costs compared to monthly or annual compounding, especially for short-term loans or lines of credit.

4. Using the Calculator

Tips: Enter the principal amount in currency, annual interest rate as a decimal (e.g., 0.05 for 5%), number of days as an integer, and the EMI installment amount. All values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does daily compounding differ from monthly compounding?
A: Daily compounding calculates interest every day, which results in slightly higher total interest compared to monthly compounding over the same period.

Q2: What is the advantage of using daily interest calculation?
A: It provides a more precise calculation of interest costs, especially for loans with variable daily balances or short repayment periods.

Q3: How is the EMI adjustment applied?
A: The EMI amount is subtracted from the total calculated amount to show the adjusted balance after the installment payment.

Q4: Can this calculator handle different currency types?
A: Yes, the calculator works with any currency as long as consistent units are used for principal and EMI amounts.

Q5: What if I have multiple EMI payments during the period?
A: This calculator assumes a single EMI payment at the end of the period. For multiple payments, a more complex amortization schedule would be needed.