I just want to know if I am calculating the interest correctly. Or is the interest rate is fluctuating slightly? Its not really that big of a fluctuation (we're looking at a range of 5-10 cents off). I'm mostly just curious as to why this is the case.
Here is a transcription of my May loan statement:
STATEMENT PERIOD APR07/16 - MAY05/16 - 29 DAYS PREVIOUS BALANCE $14,199.17 APR22 INTERNET TRANSFER $600.00CR MAY05 LIFE INSURANCE CHARGED $3.32 MAY05 DISABILITY INSURANCE CHARGED $10.39 MAY05 INTEREST CHARGED APR07-MAY05@ PRIME 2.700% + 7.400% = 10.100% TOTAL INTEREST $111.62 NEW BALANCE $13,742.50
On the back of my statements they actually state the formula used to calculate interest as:
Interest. Interest is calculated on the daily balance of your account at the end of each day. Interest starts from the date of any withdrawal. Interest is due once a month. (The bank) will automatically debit your account for interest amounts owing on the statement date. Unpaid interest will compound whether or not (the bank) has demanded payment from you or started a legal action against you. The interest rate shown on the front is the rate that applies on the statement date. The rate may, however, have changed (once or more than once) since the last statement date.
Even in a leap year, interest is calculated by multiplying the then outstanding principal amount by the current interest rate in effect at the applicable time, dividing the product by 365 and multiplying the result by the number of days in the payment period during which such current interest rate was chargeable.
These are my calculations:
PRINCIPAL = 14199.17 RATE = 0.101 TRANSFER = 600 INTEREST = PRINCIPAL * RATE / 365 * TIME INTEREST BEFORE TRANSFER (14 DAYS) = 14199.17 * 0.101 / 365 * 14 = 55.00719556 INTEREST AFTER TRANSFER (15 DAYS) = (14199.17 + 55.00719556 - 600) * 0.101 / 365 * 15 = 56.67418754 TOTAL INTEREST = 55.00719556 + 56.67418754 = 111.6813831 DIFFERENCE = 111.6813831 - 111.62 = 0.061383099
MAY 0.061383099 JUNE 0.103612429 JULY 0.056803384