Daily Interest Credit

Daily interest credit assumes that interest on the credit is accrued not monthly or annually but daily. There are two different credit accrual schemes — simple and compound. Such forms of credit may be offered no matter whether you need a small or large amount of money.

Features of Daily Simple Interest Credit

This form of credit is easy to understand. If you pay interest on the credit monthly, you divide the annual interest rate by 12 months. This figure shows what percentage of your current outstanding principal balance will go as payment for the provision of the credit.

For daily simple interest credit, the same scheme is applied. However, you divide the annual interest rate by 365 days. The value you receive will be the daily interest for the provision of the credit you will pay to the creditor. With each new payment, your outstanding balance will decrease, as well as the money you pay on daily interest.

Features of Daily Compound Interest Credit

With simple interest, the amount of money paid to the creditor is determined only in relation to the principal. However, the creditor can specify a compound interest in the credit agreement. To calculate it, the principal is added to the interest accumulated over the previous period. This means that the amount of money paid to the creditor will gradually increase. And if your credit involves daily compound interest, the amount you owe to the creditor will grow quickly. Credit cards can require paying compound interest daily. That is why this type of credit is considered one of the most expensive.

Should You Take Credits with Daily Interest Rates?

• If you are borrowing a large sum of money for a long period, paying interest monthly or annually will be preferable. Such interest rates are more predictable, and you can easily plan your budget to cover them.
• Creditors that offer a small amount of money may require paying daily interest. This scheme is often used if you are borrowing for a short period, for example, 14 days. To make a decision regarding such a credit, you should determine the equivalent of this daily interest relative to the annual interest rate. Sometimes, creditors deliberately try to disguise huge annual interest rates, which can reach 1000% or more, with a small figure for daily interest.

Late Payment of Daily Interest

If a borrower takes a daily interest credit, it is in their interests to make payments on time. Such interest will accumulate quickly, and they will have to pay much more. In addition, their principal will not decrease, as it happens with timely payment. This means that interest will be charged on a larger amount. Also, the creditor can oblige the borrower to pay late fees.