What is periodic interest and how is it calculated?
Periodic interest is calculated according to a set number of days between payments. If more than one payment is received at a time, the interest is calculated on the first payment and the new balance is figured. Then, using the new balance, the interest on the second payment is calculated and its balance is computed. Regardless of whether the client pays two days early or two months late, exactly one months interest will be charged to the regular payment. This process continues until all received payments have been calculated. The number of days in the calendar year is not relevant with periodic interest. To calculate your per diem interest with periodic interest, multiply your unpaid principal balance by your current interest rate and divide by 360. Then multiply that total by 30 to figure out your interest total for the payment. (principal balance x interest rate / 360 x 30 = total interest payment).
