Interest Calculation
Interest Caliber has the ability to charge interest to owner ledgers for unpaid balances. This document explains how the interest calculations are done. For information on how to set-up and run an interest process, see our Interest document.
Be aware that interest is not the same thing as a percent based late fee in the Delinquency Process. Interest is calculated using both the percentage indicated and the number of days a balance has been outstanding. A percent based late fee is calculated without any consideration for how long a balance has been outstanding.
Interest CalculationWhen the interest process is run, Caliber calculates a daily interest amount for the outstanding balance of a charge, and then multiplies that amount by the number of days specified when the process was initiated.
First, Caliber calculates the daily interest amount using the following formula:
Amount x interest rate in decimal form / 365 = daily interest amount
With an interest rate of 12% per diem, and an outstanding balance of $100.00, the calculation is:
$100.00 x .12 = $12.00 / 365 = $.03 per day
Now that the daily interest amount is known, Caliber multiplies that amount by the number of days:
Daily interest amount x number of days = interest charge
Using the daily interest amount calculated above, and 30 for the number of days, the calculation is:
$.03 x 30 = $.90
This will result in Caliber adding a $.90 interest charge to the owner’s ledger when the interest process is posted.
Caliber calculates the interest for each outstanding balance separately, then combines those individual amounts into a total amount, which is what gets posted to the owner’s account. This is because different charges may have been posted to the owner’s ledger on different dates. This requires Caliber to use a different number of days when calculating interest for each of the outstanding balances.
For example, using the same daily interest amount from above for one charge of $100.00 that has been outstanding for 28 days and a second of $100.00 that has been outstanding for 30 days:
$.03 x 28 = $.84
$.03 x 30 = $.90
This will result in Caliber adding a combined $1.74 interest charge to the owner’s account when the interest process is posted.
Due to the number of decimal places that Caliber uses for the calculation, the amounts may differ slightly from ones manually calculated using this formula.