Auto Loan Per Diem Calculator
This tool calculates the amount of interest that accrues on your auto loan *each day*. This "per diem" amount can be helpful for understanding how much extra principal you need to pay to reduce your loan faster, or for calculating payoff amounts between payment dates.
Enter your current outstanding loan balance and the annual interest rate (APR). The calculator will show you the daily interest accrual. Ensure your currency units are consistent.
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Understanding Auto Loan Per Diem
What is "Per Diem" Interest?
"Per diem" is Latin for "per day". In the context of loans, it refers to the amount of interest that your loan accrues on a daily basis. Most auto loans use simple interest, meaning interest is calculated on the current outstanding principal balance.
Why Calculate Per Diem?
Knowing the daily interest amount is useful for:
- Calculating payoff amounts: If you want to pay off your loan between your scheduled payment dates, you need to know the daily interest to add to your last statement balance.
- Evaluating extra payments: Understanding how much interest accrues daily helps you see the impact of making extra principal payments or paying early in your billing cycle. Every dollar of extra principal reduces the balance on which daily interest is calculated.
- Comparing loan offers (indirectly): A higher per diem interest for the same balance indicates a higher interest rate.
The Formula
The calculation is straightforward:
Daily Interest = (Current Loan Balance * Annual Interest Rate / 100) / 365
We divide the annual interest rate by 100 to convert the percentage to a decimal, and then divide the total annual interest amount by 365 (or sometimes 360, depending on the loan terms, but 365 is most common) to get the daily rate.
Example Calculation
If your loan balance is $10,000 and your annual interest rate is 6%:
Annual Interest Amount = $10,000 * (6 / 100) = $600
Daily Interest Amount = $600 / 365 ≈ $1.64
So, approximately $1.64 in interest is added to your loan principal each day.
Auto Loan Per Diem Examples
Here are some examples using different loan scenarios:
Example 1: Standard Loan
Scenario: A car owner wants to know the daily interest on their remaining loan.
Known Values: Loan Balance = $18,500, Annual Rate = 4.5%
Calculation: Daily Interest = (18500 * 4.5 / 100) / 365 = (18500 * 0.045) / 365 = 832.5 / 365
Result: Daily Interest ≈ $2.28
Conclusion: The loan accrues about $2.28 in interest daily.
Example 2: Higher Balance
Scenario: Calculating per diem for a relatively new, large auto loan.
Known Values: Loan Balance = $35,000, Annual Rate = 5.2%
Calculation: Daily Interest = (35000 * 5.2 / 100) / 365 = (35000 * 0.052) / 365 = 1820 / 365
Result: Daily Interest ≈ $4.99
Conclusion: This loan accrues about $4.99 in interest daily.
Example 3: Lower Balance
Scenario: Calculating per diem as the loan nears payoff.
Known Values: Loan Balance = $2,100, Annual Rate = 6.1%
Calculation: Daily Interest = (2100 * 6.1 / 100) / 365 = (2100 * 0.061) / 365 = 128.1 / 365
Result: Daily Interest ≈ $0.35
Conclusion: The daily interest is now down to about $0.35.
Example 4: High Interest Rate
Scenario: Understanding the daily cost of a loan with a high APR.
Known Values: Loan Balance = $12,000, Annual Rate = 12.5%
Calculation: Daily Interest = (12000 * 12.5 / 100) / 365 = (12000 * 0.125) / 365 = 1500 / 365
Result: Daily Interest ≈ $4.11
Conclusion: Despite a moderate balance, the high rate leads to over $4 in daily interest.
Example 5: Low Interest Rate
Scenario: Calculating per diem for a favorable loan term.
Known Values: Loan Balance = $25,000, Annual Rate = 2.9%
Calculation: Daily Interest = (25000 * 2.9 / 100) / 365 = (25000 * 0.029) / 365 = 725 / 365
Result: Daily Interest ≈ $1.99
Conclusion: A low rate keeps the daily interest under $2, even with a significant balance.
Example 6: Calculating Payoff (Extra Days)
Scenario: If your last statement was $5,000 and it's been 10 days since then, how much extra interest needs to be added for payoff?
Known Values: Loan Balance (last statement) = $5,000, Annual Rate = 7.0%
1. Calculate Daily Interest: Daily Interest = (5000 * 7.0 / 100) / 365 = (5000 * 0.07) / 365 = 350 / 365 ≈ $0.96
2. Calculate Total Accrued Interest: Total Accrued = Daily Interest * Number of Days = 0.96 * 10 = $9.60
Conclusion: You'd need to pay approximately $5,000 + $9.60 = $5,009.60 for a full payoff today (this is a simplified example; always get an official payoff quote).
Example 7: Impact of Extra Payment
Scenario: How much daily interest is saved by making a $1,000 extra principal payment?
Known Values: Original Balance = $10,000, Annual Rate = 6.0%, Extra Principal Payment = $1,000
1. Original Daily Interest: (10000 * 6.0 / 100) / 365 = 600 / 365 ≈ $1.64
2. New Balance: $10,000 - $1,000 = $9,000
3. New Daily Interest: (9000 * 6.0 / 100) / 365 = 540 / 365 ≈ $1.48
Conclusion: The extra $1,000 principal payment reduces daily interest by about $1.64 - $1.48 = $0.16. This saving compounded over time significantly shortens the loan term.
Example 8: Zero Balance (Payoff)
Scenario: What is the per diem when the loan is paid off?
Known Values: Loan Balance = $0, Annual Rate = 5.0%
Calculation: Daily Interest = (0 * 5.0 / 100) / 365 = 0 / 365
Result: Daily Interest = $0.00
Conclusion: Once the balance reaches zero, no more interest accrues.
Example 9: Comparing Two Scenarios
Scenario: Compare the daily interest on two loans with the same balance but different rates.
Loan A: Balance = $20,000, Rate = 4.0%
Loan B: Balance = $20,000, Rate = 7.5%
Calculation (Loan A): Daily Interest = (20000 * 4.0 / 100) / 365 = 800 / 365 ≈ $2.19
Calculation (Loan B): Daily Interest = (20000 * 7.5 / 100) / 365 = 1500 / 365 ≈ $4.11
Conclusion: Loan B accrues almost double the daily interest compared to Loan A, highlighting the impact of the interest rate.
Example 10: Very Large Loan
Scenario: Calculate per diem for a high-value vehicle loan.
Known Values: Loan Balance = $55,000, Annual Rate = 3.9%
Calculation: Daily Interest = (55000 * 3.9 / 100) / 365 = (55000 * 0.039) / 365 = 2145 / 365
Result: Daily Interest ≈ $5.88
Conclusion: A large balance, even with a relatively low rate, results in significant daily interest accrual ($5.88 per day).
Important Notes
This calculator uses a standard 365-day year for calculation. Some lenders might use a 360-day year, which would slightly change the daily amount. Always verify calculations with your lender, especially for official payoff quotes.
Frequently Asked Questions about Auto Loan Per Diem
1. What does "per diem" mean for my auto loan?
"Per diem" means "per day". The auto loan per diem is the amount of interest that your loan accumulates on a daily basis.
2. How is the daily interest calculated?
It's calculated using the formula: (Current Loan Balance * Annual Interest Rate / 100) / 365. The annual rate is divided by 100 to become a decimal, then multiplied by the balance to get annual interest, and finally divided by 365 days.
3. Why is the daily interest amount useful?
It helps you calculate accurate payoff amounts between scheduled payments and understand how extra principal payments can save you money by immediately reducing the balance on which daily interest is calculated.
4. Does the daily interest amount stay the same throughout my loan?
No. The daily interest is calculated based on your *current* loan balance. As you make payments, the principal balance decreases, and therefore the amount of interest accrued each day also decreases over time.
5. Do all auto loans calculate interest daily?
Most standard auto loans in the US use simple daily interest. However, loan terms can vary. It's always best to confirm with your lender.
6. How does paying extra principal affect the per diem interest?
Paying extra principal directly reduces your loan balance. Since the daily interest is calculated on the balance, a lower balance immediately results in a lower daily interest amount.
7. What happens if I pay off my loan early, between payment dates?
You will likely need to get a "payoff quote" from your lender. This quote will calculate the total amount owed, including the principal balance plus any interest that has accrued since your last payment up to the specific payoff date you request. This uses the daily interest amount.
8. Does this calculator use 365 or 360 days?
This calculator uses 365 days in the year for the daily interest calculation, which is standard for most auto loans.
9. Can I use this for other types of loans?
This calculation method (simple daily interest) is common for many types of loans, including mortgages. However, some loans (like certain personal loans or credit cards) use different interest calculation methods (e.g., average daily balance), so this calculator might not be accurate for those.
10. What inputs do I need for this calculator?
You need two inputs: your current outstanding loan balance (the amount you currently owe) and the annual interest rate (APR) of your loan, typically expressed as a percentage.
