How to calculate daily, monthly, and annual interest
Start with the annual rate and keep the calculation method labeled. For a simple periodic conversion, divide a nominal annual rate by 12 for a monthly rate. For a daily simple-interest rate, divide the annual rate by the required day-count basis—commonly 360, 365, or 366. To annualize a simple daily rate, multiply it by the same basis.
Example: an 8% nominal annual rate is about 0.6667% per month. On an Actual/365 basis it is about 0.021918% per day. Those conversions describe periodic rates; they do not automatically account for compounding, fees, or a lender-specific APR disclosure.
A monthly periodic calculation
On a $10,000 balance at 8% annually, a simple monthly periodic interest amount is $10,000 × 0.08 ÷ 12 = $66.67. This treats each monthly period as one-twelfth of a year.
A daily calculation
Using a 365-day basis, 30 days of interest is $10,000 × 0.08 ÷ 365 × 30 = approximately $65.75. If the period is 31 days, the amount is higher. If a 360-day convention is used, the result changes again.
Choose the daily-interest calculator that matches the question
Use the Daily Interest & Per Diem Calculator for a daily rate or per-day dollar amount. Use the Mortgage Per Diem Calculator for prepaid mortgage interest at closing, the Interest Between Dates Calculator for exact-date simple interest, and the Payoff Per Diem Calculator to extend a payoff balance through a target date.
Calendar dates create uneven periods
Months have different numbers of days, so actual-day accrual will not produce exactly the same interest every calendar month. A loan with payments on January 31, February 28, and March 31 can have very different day counts between rows.
Payment posting time can affect daily interest
With daily accrual, reducing principal one day earlier can reduce the balance used for the next day's interest. That makes the posting date relevant. A monthly periodic schedule may treat every payment as occurring at the end of an equal period and therefore miss these small timing effects.
Match the lender method before comparing cents
If a schedule differs from a lender statement, determine whether the loan uses actual/365, actual/360, 30/360, or a monthly periodic method. Also verify whether interest is rounded each day, each payment period, or only for display.
Day-count conventions can create systematic differences
A day-count convention is not just a rounding preference. It defines how a year is divided for interest purposes. Actual/365 uses the actual number of elapsed days over a 365-day denominator. Actual/360 uses actual days over 360. A 30/360 method simplifies months to 30 days and years to 360 days under defined rules.
On a large balance, small daily differences can accumulate. If you are auditing a commercial note or irregular-payment loan, record the convention explicitly in the schedule header or notes. Do not rely on a generic “daily interest” label.
For consumer planning, a monthly periodic calculation is often sufficient when the loan itself is structured that way. For reconciliation, however, match the lender’s stated method. Accuracy comes from using the same assumptions, not from choosing whichever convention produces the most favorable result.
Working with changing construction balances?
Construction loans can accrue daily interest on a balance that changes each time funds are drawn or principal is repaid. The construction-loan calculator handles those dated balance changes directly.
Use the free calculator—or save the payoff as a reusable file
For a quick daily-interest or per-diem calculation, use the free browser calculator. If you calculate payoff interest regularly and need to save borrower details, reopen prior work, print a one-page payoff worksheet, or save it as PDF, use Daily Interest & Payoff Calculator Pro for Windows.
Need a complete editable amortization schedule instead? See Amortization Pro.