How to Convert Daily Percentage Rate to Annual Percentage Rate

How to Convert Daily Percentage Rate to Annual Percentage Rate

Tip

Convert an annual percentage rate into a daily percentage rate by dividing the annual percentage rate by 365. The calculation for federal student loans uses 365.25 instead of 365 to account for leap years. Some other creditors might also use this method, although it only makes a very slight difference in the calculation.

Creditors typically use the daily percentage rate, also known as the daily periodic rate, to calculate finance charges. This method allows borrowers to pay interest based on the actual number of days the money was borrowed rather than calculating by the month, which varies in length from 28 to 31 days. The daily percentage rate is related to the annual percentage rate through a simple calculation, so you can convert from one type of interest rate to the other.

Step 1

Look up your daily percentage rate for the loan, credit line or account. It might be listed as the daily periodic rate or the interest rate factor.

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Step 2

Multiply the daily percentage rate by 365 to convert it to an annual percentage rate.

Step 3

Multiply the result by 100 if the answer came out as a decimal and you want to express it as a percent. For example, if you found the daily rate is 0.000274, multiply by 365 to find that your annual rate is 0.1. Multiply by 100 to find that the annual percentage rate is 10 percent. Depending on the format of the initial daily rate, you might not need to do this step.