Formula Used
Simple interest:
Interest = Principal × Annual Rate × Year Fraction
Periodic compounding:
Interest = Balance × ((1 + r / n) ^ (n × t) - 1)
Continuous compounding:
Interest = Balance × (e ^ (r × t) - 1)
Here, r is the annual rate as a decimal.
n is the compounding periods per year.
t is the year fraction from the selected day-count basis.
Payments reduce unpaid interest first, then reduce principal.
How to Use This Calculator
- Enter the original loan principal.
- Add the annual interest rate as a percentage.
- Select the accrual start and end dates.
- Choose a day-count basis used by your loan agreement.
- Select simple, periodic compound, or continuous compound interest.
- Add scheduled and extra payments if needed.
- Press Calculate Accrual to view results above the form.
- Download the CSV or PDF report for records.
Example Data Table
| Scenario |
Principal |
Rate |
Basis |
Method |
Term |
Monthly Payment |
| Commercial loan |
$250,000 |
7.25% |
Actual / 365 |
Monthly compound |
18 months |
$3,500 |
| Bridge loan |
$125,000 |
10.50% |
Actual / 360 |
Simple accrual |
9 months |
$0 |
| Equipment loan |
$80,000 |
8.10% |
30 / 360 |
Quarterly compound |
24 months |
$2,200 |
Loan Interest Accrual Guide
What Accrual Means
Loan interest accrual means interest builds over time. It may build daily,
monthly, quarterly, or by another contract rule. The lender uses the
outstanding balance, the annual rate, and the exact time period. This
calculator helps show that growth clearly. It also shows how payments
change the balance.
Why Day Count Matters
A loan can use different day-count methods. Actual / 365 divides real
days by 365. Actual / 360 is common in business lending. It usually
creates slightly higher interest. The 30 / 360 method treats months as
thirty days. Actual / Actual adjusts for leap years. Small differences
can become important on large balances.
Simple Versus Compound Interest
Simple interest applies the rate to the principal balance. It does not
add interest back into the balance unless the loan agreement allows it.
Compound interest adds earned interest to the balance. Future interest
then grows on that larger amount. Continuous compounding is a theoretical
method. It is useful for comparisons and finance models.
Payments and Payoff Review
Payments usually cover interest first. Any remaining amount reduces
principal. Extra payments can lower future accrual. They can also shorten
the time needed to repay a loan. The payoff amount includes the remaining
balance, unpaid interest, and separate fees when selected.
Using the Results
Use the summary cards for quick review. Use the schedule to audit each
period. The chart shows the direction of the balance and interest. Export
the CSV for spreadsheets. Export the PDF for sharing. Always compare the
result with the signed loan agreement before making a final decision.
FAQs
1. What is loan interest accrual?
It is the interest that builds on a loan over time. The amount depends on principal, rate, days, compounding, fees, and payment activity.
2. Which day-count basis should I choose?
Use the basis written in your loan agreement. Actual / 365, Actual / 360, Actual / Actual, and 30 / 360 can produce different results.
3. Does this calculator support compound interest?
Yes. It supports simple accrual, periodic compounding, and continuous compounding. You can also select annual, quarterly, monthly, or daily compounding.
4. How are payments applied?
Payments are applied to accrued interest first. Any remaining payment reduces principal. This mirrors many common loan servicing methods.
5. What does capitalized interest mean?
Capitalized interest is added to the loan balance. After that, future interest can accrue on both principal and added interest.
6. Can I include loan fees?
Yes. You can finance fees into the balance or keep them separate. The payoff result changes based on that choice.
7. Why does Actual / 360 show more interest?
Actual / 360 divides actual days by 360 instead of 365. This makes the year fraction larger for the same date range.
8. Is the result a legal payoff quote?
No. It is an estimate for planning and review. Ask the lender or servicer for an official payoff quote.