Interest is paid on the total amount of money borrowed also known as the. When the amount of interest the principal and the time period are known you can use the derived formula from the simple interest formula to determine the rate as follows. 00083 x 100 083.
How a simple interest loan works.
The average daily balance used is often arrived at using 1365th multiplied by the days in the. The simple daily interest is the amount of interest rate that you are required to pay each month. Divide your annual interest rate by 360 to find the daily interest rate. If you have a 6 percent interest rate and you make monthly payments you would divide 006 by 12 to get 0005.