How to Calculate an Interest Rate Factor

The interest rate factor is the daily rate on a loan. It is commonly used in mortgage transactions to calculate the interest you'll have to pay each month. Determining the interest rate factor for your upcoming or existing loan is a very quick process that you can complete by hand or by using a standard calculator.

Determine the interest rate on the loan and then express it as a decimal point. So for instance, if your rate is 6.75 percent, express it as .0675.

Divide the interest rate in decimal form by 365.25 days (the extra .25 represents a quarter day to account for leap years). The final figure is your interest rate factor. So in this case it is .0675 divided by 365.25, which equals 0.000184804928131.

Multiply the interest rate factor by the balance to get the daily interest rate. If the balance is $250,000 the daily interest is $46.20 per day (0.000184804928131 times 250,000).

About the Author