How daily compound interest works
With daily compounding, the annual rate is split across 365 days and a day's interest is added to the balance each day. The next day's interest is then charged on that slightly bigger balance, so interest builds on interest.
This matters when you aren't repaying, for example during a payment holiday, when a loan is deferred or when the whole amount is due at the end. The calculator assumes nothing is repaid during the time period.
On a loan you're repaying each month, your payments reduce the balance, so interest is charged on a falling amount. Use the loan interest calculator to see the cost of a loan you're repaying.
Worked example
Borrowing £5,000 at 10% a year, compounded daily, with nothing repaid for 2 years, you'd owe £6,106.85 at the end. That's £1,106.85 of interest, and a balance 1.22 times the amount you borrowed.
Compounded monthly instead, the balance would be £6,101.95. With interest added once a year, it would be £6,050.00.
How the calculation works
The calculator converts the daily rate to an equivalent monthly rate and projects the balance month by month. It uses 365 days a year, so the result can differ slightly from a lender that uses a different day count or adds interest on particular dates.
Inputs for the compound daily interest loan calculator
Amount borrowed
The balance you start with, such as the amount you borrowed or the amount you owe now.
Annual interest rate
The yearly interest rate on the loan. The rate shown is only an example, so enter the rate from your loan agreement.
Time period
How many whole years the balance builds up with nothing repaid.
Interest compounds
Set to daily on this page. You can switch to monthly, quarterly or annually to compare how much difference the compounding frequency makes.
CALCULATOR QUESTIONS
Compound daily interest loan calculator questions
How much does daily compounding add?
A little more than monthly or annual compounding at the same rate. £5,000 at 10% for 2 years grows to £6,106.85 compounded daily, compared with £6,101.95 monthly and £6,050.00 annually.
Is daily interest the same as daily compounding?
Not always. Some lenders work out interest daily but only add it to the balance monthly. Interest is only compounded when it's added to the balance and starts earning interest itself.
Does this include repayments?
No. It shows how the balance grows when nothing is repaid. For a loan you're repaying, use the loan interest calculator.
Why is my lender's figure slightly different?
Lenders may use a different number of days in the year, add interest on set dates or charge fees. Check your loan agreement for the exact method.