1. What is Line Of Credit Interest?

Line Of Credit Interest is the cost of borrowing money from a line of credit, calculated based on the outstanding balance, interest rate, and the number of days the balance is outstanding.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( Balance \) — Outstanding balance (currency)
• \( Rate \) — Annual interest rate (decimal)
• \( Days \) — Number of days the balance is outstanding

Explanation: The formula calculates the interest by multiplying the balance by the annual rate, then prorating it for the actual number of days the amount was borrowed.

3. Importance of Interest Calculation

Details: Accurate interest calculation helps borrowers understand the true cost of borrowing, plan repayments, and compare different credit options effectively.

4. Using the Calculator

Tips: Enter the outstanding balance in currency, annual interest rate as a decimal (e.g., 0.05 for 5%), and the number of days. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Why divide by 365 days?
A: This assumes a 365-day year for interest calculation, which is the standard method used by most financial institutions.

Q2: What's the difference between decimal and percentage rate?
A: A 5% interest rate equals 0.05 in decimal form. Divide the percentage by 100 to get the decimal equivalent.

Q3: Does this calculator account for compounding interest?
A: No, this calculates simple interest. For compound interest, a different formula would be needed.

Q4: Can I use this for different currencies?
A: Yes, the calculator works with any currency as long as you're consistent with your input and interpretation of the result.

Q5: How accurate is this calculation for actual bank statements?
A: This provides a close estimate, but actual bank calculations may vary slightly due to different day count conventions or rounding methods.