A per diem on a car loan is the amount of interest that accumulates on a daily basis. Lenders will provide a per diem figure to another lender when they are expecting a payoff check.
Significance
To calculate the per diem, you will need the balance owed and the interest rate for the car loan. For example, if the interest rate is 7 percent, (.07), divide it by 360 and multiply the result times the balance, ($10,000). The per diem is $1.94. Interest accrues at a rate of $.194 per day in this example.
Considerations
The per diem figure is reduced if the interest rate is lowered and the balance remains the same. The per diem figure is reduced if the interest rate remains the same and the balance is lowered.
Effects
If the balance and interest rate are both reduced, the per diem will be reduced even further.
Function
When a payoff figure is provided from one lender to another a per diem figure is included with the payoff statement. A per diem allows a lender to add the additional amount if the payoff is going to be received later than the payoff date entered on the statement.
Time Frame
If you are sending in a payoff to your lender, you can calculate the payoff using the per diem. Take the interest rate of 7 percent, (.07) and divide by 360 and multiply by the number of days since the last payment date until the date the payoff is to be made. The result is multiplied times the balance.