Daily Compounding Loan Interest Calculator

Daily compounding means interest is calculated and added to the principal balance every day. This results in higher total interest compared to monthly or annual compounding because interest earns interest more frequently. For borrowers, it means higher costs; for investors, higher returns.

The formula is A = P × (1 + r/365)^t, where:

• P = principal (loan amount)
• r = annual interest rate (as a decimal, e.g., 5% = 0.05)
• t = number of days
• A = total amount after interest

Total interest = A - P. This calculator automates the process for you.

For borrowers, daily compounding results in higher total interest costs compared to less frequent compounding (e.g., monthly or annually). For lenders (or investors), daily compounding yields higher returns. Always consider the compounding frequency when comparing loan offers.

Yes, this calculator works for any loan or investment where interest compounds daily. Common examples include credit cards, payday loans, short-term business loans, and high-yield savings accounts. It's also useful for understanding the true cost of borrowing.

The effective annual rate (EAR) accounts for compounding and shows the true annual interest rate. For daily compounding, EAR = (1 + nominal rate/365)³⁶⁵ - 1. EAR is always higher than the nominal rate and is the rate you actually pay or earn over a year.

This calculator uses the standard compound interest formula with daily compounding. Results are accurate to two decimal places. However, actual loan agreements may have additional fees or different calculation methods; always consult your lender for precise figures.