1. What is Per Diem Interest?

Per Diem Interest refers to the daily interest charged on an auto loan balance. It represents the amount of interest that accrues each day based on the current loan balance and annual interest rate.

2. How Does the Calculator Work?

The calculator uses the Per Diem Interest formula:

Where:

• \( Balance \) — Current auto loan balance in dollars
• \( Rate \) — Annual interest rate as a percentage
• \( 365 \) — Number of days in a year

Explanation: The formula calculates how much interest accrues daily on your auto loan, helping you understand the daily cost of borrowing.

3. Importance of Per Diem Interest Calculation

Details: Understanding daily interest accrual helps borrowers make informed decisions about extra payments, refinancing options, and overall loan management strategies.

4. Using the Calculator

Tips: Enter your current auto loan balance in dollars and your annual interest rate as a percentage. Both values must be positive numbers for accurate calculation.

5. Frequently Asked Questions (FAQ)

Q1: Why calculate per diem interest for auto loans?
A: Calculating daily interest helps borrowers understand how much interest accrues each day, which is useful for making extra payments and tracking loan costs.

Q2: Does per diem interest change over time?
A: Yes, as your loan balance decreases with each payment, the daily interest amount will also decrease proportionally.

Q3: Should I use 365 or 360 days for calculation?
A: Most auto loans use 365 days for per diem calculations, but some lenders may use 360 days. Check your loan agreement for specifics.

Q4: How can I reduce my per diem interest?
A: Making extra principal payments reduces your loan balance, which directly decreases the daily interest accrual.

Q5: Is per diem interest tax deductible?
A: For personal auto loans, interest is generally not tax deductible. For business vehicles, consult with a tax professional about deductibility.