Line of Credit Interest Calculator

See the interest cost of carrying a credit-line balance.

How it is calculated

The tool uses simple daily interest on a balance that stays the same for the whole period: daily interest = balance × annual rate ÷ 100 ÷ 365, then interest = daily interest × days, and total due = balance + interest. Balance is the amount drawn, in dollars, not the credit limit; the annual rate is a percent per year (11.5 means 11.5%); days is the number of days the balance stays outstanding. A 365-day year is used, with no leap-year or 360-day option. Interest is not compounded, and the tool adds no fees or minimum payments. All three fields are required and none may be negative, otherwise no result appears. Zero days gives zero interest but still shows the daily figure. If your balance changes during the month, run the tool once for each stretch of days at each balance and add the results.

Worked example

You have drawn 15000 on a line of credit at 11.5% a year and keep that balance for 30 days. Interest per year: 15000 × 11.5 ÷ 100 = 1,725. Per day: 1,725 ÷ 365 = $4.73. For 30 days: 4.7260 × 30 = $141.78. Total due: 15,000 + 141.78 = $15,141.78. If you repaid part of the balance halfway through, you would calculate each 15-day stretch separately with its own balance.

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Common mistakes

  • Entering the credit limit as the balance. Interest is charged only on the amount actually drawn, so use the drawn balance.
  • Entering the rate as a decimal (0.115) instead of a percent (11.5). The interest would be about one hundredth of the right amount.
  • Entering a monthly rate in the annual-rate box. The tool divides by 365 as if the rate were per year.
  • Using one balance for a month in which you drew or repaid funds. Split the month into periods with a constant balance and add the interest for each.
  • Comparing the result to a statement that uses a 360-day year or compounds daily. Small differences in cents are normal because this tool uses 365 days and simple interest.

About this calculator

A line of credit charges interest only on the portion of the credit limit that’s actually drawn and outstanding at any given time, not on the full approved limit — unlike an installment loan, where interest accrues on the full disbursed amount from day one. Interest typically accrues daily on the outstanding balance at the line’s variable or fixed annual rate, and is billed monthly.

Because the balance on a revolving line of credit changes as funds are drawn and repaid, interest owed for a period is calculated as (average daily outstanding balance × annual interest rate ÷ 365) × number of days in the period, rather than a fixed monthly payment figure like a term loan has. Businesses use lines of credit for working capital and cash flow gaps precisely because interest costs shrink automatically as the balance is paid down, unlike a lump-sum loan.

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