I have a loan with total interest disclosed as $4122.66. I calculate the interest as $4127.03, both are "simple interest" calculations. Why the difference? Is there a "maximum difference" that is allowable by law?
Interest calculations can be tricky. You should look at your contract to verify the accrual method as that is my first guess causing the difference.
While the formula is simple, "Principal x Rate x Time = Interest" there are variances in this formula. When you calculate the rate, that is an annualized number. It has to be broken down to match your periods, either days or months. That means the lender could use the actual number of days in a year, a flat 365 or assume that each month has 30 days and the year has 360 days.
BankingQuestions.com is a free service made possible by the generous support of our advertisers. Advertisers are not responsible for site content. Please help us keep BankingQuestions.com FREE by supporting our advertisers. When you see an ad for a product or service you may have an interest in, click through to learn more.
Accounts
Article
Q&A
Podcast
Video
Blog
Discussions
PDF
Powerpoint
Interest calculations can be tricky. You should look at your contract to verify the accrual method as that is my first guess causing the difference. 