How do you calculate per diem interest on an auto loan?

Multiply your current balance by the annual interest rate, then divide by the number of days in the year your lender uses — usually 365 for consumer auto loans. For example, an $18,000 balance at 6.5% works out to $18,000 × 0.065 ÷ 365 = $3.21 per day. Multiply by the number of days until your lender receives the payoff funds to get the accrued interest.

What is per diem interest at closing?

Per diem interest at closing is prepaid interest covering the days between your closing date and the end of that month, collected upfront because your first regular mortgage payment does not cover that partial period. Closing near the end of the month means fewer days of prepaid interest and less cash needed at closing, though your first full payment then comes due sooner.

Does per diem interest change over time?

Yes. Per diem is calculated on your current outstanding balance, so as you pay down principal the daily accrual falls. This is why payoff quotes are only valid through a stated date — the figure is accurate only for the balance and timeframe it was generated for.

Is per diem interest calculated on 360 or 365 days?

It depends on the loan. Most US consumer loans, including auto loans and residential mortgages, use a 365-day basis. Many commercial loans use 360, which produces a slightly higher daily figure for the same quoted rate. Your loan agreement states which convention applies.

Per Diem Interest Calculator

Daily interest accrual for payoff quotes and closings.

Per Diem Interest Calculator

Daily interest accrual for payoff quotes and closings.

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Current Loan Balance

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Formula verified June 2026

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Per Diem Interest: The Number Behind Every Payoff Quote

Per diem interest is simply the amount your loan accrues in a single day. It is the figure lenders use to build payoff quotes, prorate interest at closing, and calculate what you owe when a payment lands mid-cycle.

Per Diem = Balance × (Annual Rate ÷ Days in Year) $18,000 × (6.5% ÷ 365) = $3.2055 per day

Two details change the answer more than people expect.

The day-count basis. Most consumer loans divide by 365; many commercial loans divide by 360, which makes each day slightly more expensive — $3.2500 instead of $3.2055 in the example above. Your loan agreement specifies which applies. The 365/360 Calculator covers that convention in depth.

Per diem is calculated on the current balance, so it falls as you pay the loan down. A quote generated today will not match one generated next month, which is exactly why payoff quotes carry expiry dates.

The Three Moments Per Diem Actually Costs You Money

1. Paying off a loan. A payoff quote is your balance plus per diem interest for every day until the lender receives funds — not until you send them. Mail a cheque and you may be paying 5-7 extra days of accrual. On a $30,000 balance at 7% that is roughly $5.75 a day, so the difference between wiring and mailing can be $40 or more. Ask for a quote "good through" a specific date and pay by the fastest method available.

2. Closing on a mortgage. Lenders collect prepaid interest from your closing date through the end of that month. Close on the 3rd and you pay ~28 days of per diem at closing; close on the 28th and you pay ~3 days. On a $400,000 loan at 6.5%, that is the difference between roughly $1,993 and $214 in cash at the table. Closing late in the month is a genuine, legal way to reduce cash-to-close — though you then start repayment sooner, so it is a timing shift rather than a saving.

3. Selling a car with a loan on it. The dealer or buyer pays off your lender directly, and the payoff figure includes per diem to the funding date. Knowing your daily rate lets you check their number rather than accepting it.

One caution: your final payoff amount may also include a lien release fee, title transfer cost, or in rare cases a prepayment penalty. Per diem tells you the interest component, not the whole invoice.