Help needed to calculate overdraft interest charges

da8iwr

I have a client who has gone behind in his payments, and has offered to pay any OD interest rates i incur to keep things OK between us.

So i have looked all over the Internet and everybody appears to be having the same problems of finding this maths.

This is as close as i have so far,

Over draft EAR rate percent / 365 X days he has owed me X money he owes me.

Does any body know if this is correct?

Many thanks
Ian

Lokolo

Um?

((Overdraft Rate * Amount) / 365) * number of days = interest total

interest total + Amount = total amount payable

Overdraft Rate = number% / 100 - e.g. 10.9 / 100

YorkshireBoy

Overdraft interest is usually (always?) charged monthly. Therefore you can't use the EAR. You need to ascertain the annual non-compounded rate* and divide that by 365 in order to calculate the daily interest.

You'll then need to compound this at the end of the charging period. Easy for a static, ie defaulted, debt, but a little harder to calculate if your client is making payments to reduce the debt.


* If this isn't expressly given, multiplying the monthly rate by 12 will produce it for you.