Interest is calculated as simple daily interest. This means that each day the outstanding principal balance is multiplied by the interest rate and divided by 365 days to calculate that day's interest amount. For example, if you have a $10,000 loan and the interest rate is 7%, one day's interest will be ($10,000 x 0.07) / 365 = $1.92. For more information, read our article on
interest rates.