Actual/360 vs Actual/365: why the day count changes your interest
Two loans with the same rate can charge slightly different interest each month, depending on how the lender counts days.
The three common methods
- Standard monthly: every month counts the same, as one twelfth of the yearly rate.
- Actual/360 (the bank method): interest = capital × rate × actual days in the period ÷ 360.
- Actual/365: same, but divided by 365.
Same loan, one 31-day month
| Capital | 100,000 |
|---|---|
| Yearly rate | 12% |
| Standard monthly | 1,000.00 |
| Actual/360 (31 days) | 1,033.33 |
| Actual/365 (31 days) | 1,019.18 |
For a 28-day month the same loan costs 933.33 under Actual/360 and 920.55 under Actual/365. Over a full 365-day year, Actual/360 charges about 1.4% more interest than Actual/365 (an effective 12.17% instead of 12.00%), because it divides by a smaller number.
Which one applies to you?
Look at your loan contract for the words "actual/360", "365 days", "30/360" or "monthly". Loan Reminder App has a calculation method for each, so your schedule can match your lender's.
Frequently asked questions
What is the bank method?
It usually means Actual/360: interest uses the real number of days in the period and a 360-day year.
Is Actual/360 more expensive than Actual/365?
For the same rate and the same days, yes, slightly, because the divisor is smaller.
How do I know which method my lender uses?
Check the loan contract or ask the lender how interest is calculated.
Open the free web app, add a loan, and see your schedule, interest and the effect of extra payments.
Open Loan Reminder App