How to Calculate Per Diem

Per diem is a Latin phrase that means "for a day." The term per diem is most often used to refer to one of two things. Employees are frequently paid specified per diem amounts to cover business expenses, particularly those incurred while traveling. The term is also used to refer to daily interest for short periods, such as the days between the closing of a mortgage and the initial payment date when the normal interest cycle goes into effect.

Per Diem Expenses

Step 1

Ask your payroll department what the per diem rate is for a business expense you incurred or expect to incur. For example, the per diem allowance for meals while traveling on business might be $45.

Step 2

Learn your employer's policies for determining which days count for payment of per diem expenses. For example, suppose you take an afternoon flight on a business trip, stay at your destination for three days, and return on the morning of the fifth day. Depending on your employer's policies, this trip might be viewed as being three days or four days or five days for the purpose of calculating per diem.

Step 3

Multiply the per diem amount by the total number of days for which you incur expenses. For a per diem rate of $45 on a business trip lasting 5 days, you have 5 x $45 = $225.

Per Diem Interest

Step 1

Divide the annual percentage rate (APR) by 365 (the number of days in a year) to find the daily interest rate for calculating per diem interest. The APR will be stated in the mortgage or other contract. For example, if a mortgage has an APR of 7.30 percent, the daily interest rate is 7.30 percent divided by 365, or 0.02 percent. If you use a calculator, convert percentage to decimal form by dividing by 100 (0.02 percent divided by 100 equals 0.0002).

Step 2

Multiply the daily interest rate by the principal amount. For a $150,000 mortgage and a daily interest rate of 0.0002, you have $150,000 x 0.0002 = $30.00. This is the per diem interest.

Step 3

Multiply the per diem interest by the number of days to calculate total interest charges. If you've just closed a mortgage and the first payment is due in 14 days, then with a per diem rate of $30, the total per diem interest that will be added to the principal of the mortgage equals 14 times $30, or $420.

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