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I'm trying to calculate the interest accrued on my amortization schedule manually. I can calculate it fine if payments are exactly one month apart but this payment is less than 1 month apart.

Last transaction date is 2017-01-01

Next payment is on 2017-01-15 and interest accrued is 362.47 for this payment.

Details of loan

As of 2017-01-01 balance is 350,000

Compounding Monthly

Interest rate 2.7%

May I ask how was 362.47 calculated?

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2 Answers 2

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The interest compounds monthly but accrues daily. I'm guessing (since the math results in the same answer) that the accrual method is ACT/365, meaning that the amount of accrued interest is calculated based on the actual number of days divided by 365.

With a $350,000 principal balance, the interest that accrues in 14 days (from the 1st to the 15th) is

$350,000 * 2.7% * (14 / 365) = $362.4658 (rounds to $362.47)
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  • Great answer @D Stanley. What if it's crossing over 2 diff day count intervals. 2016-12-20 and payment is made 2017-01-10. And accrual method is ACT/ACT.
    – user3276954
    Commented May 1, 2017 at 15:51
  • Then you calculate two interest accrual periods and add the accrued amounts - one through 12-31 and one from 01-01 through 01-10.
    – D Stanley
    Commented May 1, 2017 at 15:59
  • How does this formula take into account the monthly compounding of the stated interest rate?
    – DJohnM
    Commented May 1, 2017 at 17:35
  • @DJohnM It doesn't. The compounding would increase the principal amount monthly (and similarly a payment would reduce it). The formula above only accounts for the interest accrued between compound/payment periods.
    – D Stanley
    Commented May 1, 2017 at 18:25
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Interest accrued is Principal ($350,000) * interest rate (0.027) / per day (365) * days since last payment (14).

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