The Interest Savers

	Home \| Contact Us

AS SEEN ON NATIONAL TELEVISION
OVER 60 TIMES

"Programs that make it easy to check your
Bank Statement"

FIRST IN THE WORLD made available to bank customers
Appeared 3 times on front cover of MONEY MAGAZINE

HOW LENDERS CALCULATE INTEREST 7/2/2007

|BACK|

HOW LENDERS CALCULATE INTEREST

IT REALLY IS A SIMPLE PROCESS
UNDERSTAND HOW THEY CHARGE YOU INTEREST
BE ABLE TO QUESTION THEIR CALCULATIONS
INTEREST IS YOUR BIGGEST EXPENSE

1. The interest rate is divided by 365 (days in the year) e.g. 7 . 0% INTEREST RATE = 7/365 = 0 . 01918%

2. The rate of 0 . 01918% is applied to the daily outstanding balance (i.e. last balance at the end of each day).

3. The amounts calculated for each of the days in the month ( or period ) are added together and debited to
your account at the end of the month. This increases the balance owing on which interest is then calculated.

e.g. start date = 01-01-1999
end date = 30-01-1999 i.e. 30 days
In this case the debit interest charge would usually appear on the statement on 31-01-1999.

EXAMPLE: Loan Balance = $100,000 Interest Rate = 7 . 00% p.a. compounded monthly (i.e. charged monthly) *

Daily Interest = $100,000 X 0 . 01918% = $19 . 178 (rounded to $19 . 18) X Number of Days in
month. e.g. 30 days = $19 . 178 X 30 = $575 . 34 interest charge for the month.
The loan balance of $100,000 would now be increased by $575.34 to $100,575.34 less any repayments.
See next section for meaning and importance of ‘compounding’.

SAMPLE STATEMENT No. 1

Note that the daily interest amount of $19 . 178 is rounded to $19 . 18 on the screen.
The amount of $19 . 178 is actually used for the calculations when multiplying by the
number of days in the period ( e.g. 30 days ).