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Auto Loan Per Diem Formula:
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The Auto Loan Per Diem is the daily interest amount charged on an auto loan. It represents how much interest accrues each day on your outstanding loan balance.
The calculator uses the per diem formula:
Where:
Explanation: The formula calculates the daily interest by taking the annual interest (loan × rate) and dividing it by the number of days in a year.
Details: Knowing your per diem helps you understand how much interest accrues daily, which is particularly important when making early payments or paying off your loan.
Tips: Enter the loan amount in USD and the annual interest rate as a percentage (e.g., enter 5 for 5%). Both values must be positive numbers.
Q1: Why calculate per diem on an auto loan?
A: It helps borrowers understand daily interest costs, especially useful when making extra payments or paying off loans early.
Q2: Does per diem change over the loan term?
A: Yes, as you pay down the principal, the per diem amount decreases since it's calculated on the remaining balance.
Q3: How does per diem affect early payments?
A: Making payments earlier in the billing cycle reduces total interest by cutting off days of accrued interest.
Q4: Is 365 days always used in the calculation?
A: Some lenders may use 360 days for simplicity, but 365 is more accurate and commonly used.
Q5: Can per diem help compare loan offers?
A: Yes, comparing daily interest costs between loans can help identify the most cost-effective option.