How does the calculator handle a 365/365 loan?
It divides the annual rate by 365 for the daily rate, then multiplies by an average month of 365 ÷ 12 days. The days cancel, so the monthly rate equals the annual rate divided by 12, the same as a standard monthly schedule.
The payment comes from the amortization formula using that monthly rate. Total interest is the payment times the number of payments minus the loan amount, and the effective annual rate is the monthly rate compounded over 12 months.
For the savings figure, the calculator reruns the loan with a 365/360 monthly rate, which is the annual rate times 365/360 divided by 12. The difference in total interest is what the 365/365 method saves.
Monthly rate = (R ÷ 365) × (365 ÷ 12) = R ÷ 12 M = P × i × (1 + i)^n ÷ ((1 + i)^n − 1) Saved = Interest(365/360) − Interest(365/365)
- R
- nominal annual rate
- i
- monthly rate
- P
- loan amount
- n
- number of monthly payments
- M
- monthly payment
Example: $250,000 at 6.75% over 15 years, 365/365 vs. 365/360
Scenario: An investor finances a $250,000 rental property at an illustrative 6.75% nominal rate over 15 years and wants to see what an actual/365 clause is worth.
- Daily rate6.75% ÷ 365 = 0.018493% per day
- Monthly rate0.018493% × (365 ÷ 12) = 0.5625%
- Monthly payment$250,000 over 180 months at 0.5625% = $2,212.27
- Total interest$2,212.27 × 180 − $250,000 = $148,208.60
- Same loan on 365/360Monthly rate 0.57031%, payment $2,225.29, total interest $150,552.20
- Interest saved$150,552.20 − $148,208.60 = $2,343.60
The 365/365 loan costs $2,212.27 a month and saves $2,343.60 in interest compared with 365/360, at an effective annual rate of 6.963%.
Real accrual uses actual days in each period, so individual payments may vary by a few dollars from this average-month model.
When does checking for 365/365 pay off?
Comparing two quotes at the same rate
If one lender uses actual/365 and another actual/360, the first is cheaper. The savings figure shows by how much.
Reading a loan agreement's interest clause
Agreements often bury the day count in the definitions. Knowing what 365/365 means lets you confirm the quoted rate is the real rate.
Checking daily interest on a payoff
Payoff quotes add per-diem interest. On a 365/365 loan that is balance × rate ÷ 365 for each day.
Weighing a slightly higher rate on better terms
A 365/365 loan at a marginally higher rate can still beat a 365/360 loan at a lower one. Compare the effective rates.
What mix-ups happen with actual/365 loans?
Thinking the effective rate equals the nominal rate
Even with no day-count premium, monthly compounding pushes the effective annual rate a little above the quoted rate.
Treating 365/365 and 30/360 as identical in every month
They match on average, but actual/365 charges more for 31-day months and less for February.
Ignoring leap-year language
Some contracts divide by 365 even in a 366-day year, charging one extra day of interest. Others divide by 366.
Assuming all lenders state the method
If the agreement is unclear, ask in writing which convention applies before closing.
How does the 365/365 advantage grow with the term?
The savings scale with both the balance and the number of years interest is charged. On $250,000 at 6.75%, the table shows the gap between the two conventions widening as the term lengthens, because the day-count premium applies to every month's balance.
Across these terms the savings run from about 1.46% to 1.62% of the 365/365 loan's total interest, a little more than the 1.39% rate premium, because the extra interest under 365/360 also slows principal repayment.
| Term | 365/365 payment | 365/365 total interest | 365/360 total interest | Saved with 365/365 |
|---|---|---|---|---|
| 5 years | $4,920.87 | $45,252.20 | $45,913.40 | $661.20 |
| 10 years | $2,870.60 | $94,472.00 | $95,914.40 | $1,442.40 |
| 15 years | $2,212.27 | $148,208.60 | $150,552.20 | $2,343.60 |
| 20 years | $1,900.91 | $206,218.40 | $209,568.80 | $3,350.40 |
Terms used on this page
- Day-Count Convention
- A day-count convention is the rule a lender uses to turn an annual interest rate into daily interest. Common methods are 365/365, which divides the rate by 365 and charges actual days, and 365/360, which divides by 360 but still charges actual days. The 365/360 method produces slightly more interest for the same stated rate.
- Compounding Frequency
- Compounding frequency is how often interest is calculated and added to a balance, such as yearly, quarterly, monthly or daily. More frequent compounding means interest starts earning interest sooner, so the effective yearly yield rises slightly. The effect is real but modest, and it shrinks as rates fall.
- Interest Rate
- An interest rate is the price of money, stated as a percentage of the balance per year. Borrowers pay it to lenders, and savers earn it from banks. The rate alone does not include fees or compounding, so it can understate the true yearly cost of a loan or overstate a simple comparison of savings accounts.
- Amortization
- Amortization is the process of paying off a loan with equal, regular payments that each cover the interest due for the period plus a slice of principal. Early payments are mostly interest; later ones are mostly principal. By the final payment the balance reaches exactly zero, which is how most car, personal and student loans work.
365/365 Loan Calculator: common questions
Is 365/365 better than 365/360 for borrowers?
Yes, at the same quoted rate. Under 365/365 a year's interest equals the stated rate, while 365/360 charges about 1.39% more. On the illustrative $250,000, 15-year loan at 6.75%, 365/365 saves $2,343.60 over the life of the loan. The longer the term and the larger the balance, the more the method is worth. Comparing effective annual rates is the quickest way to rank two offers that use different conventions.
How do I calculate daily interest on a 365-day basis?
Multiply the balance by the annual rate and divide by 365. For $250,000 at 6.75%, that is $250,000 × 0.0675 ÷ 365 = $46.23 a day. Multiply by the days in the period to get that period's interest. As the balance falls, the daily figure falls with it. Lenders use this per-diem figure in payoff quotes.
Why is the effective rate higher than the quoted rate on a 365/365 loan?
Because interest is effectively compounded monthly when you make monthly payments. A 6.75% nominal rate compounded 12 times a year works out to about 6.963% a year. The gap comes from compounding only; there is no day-count premium under 365/365. Under 365/360, the same loan would show a higher effective rate because the day-count premium is added on top of compounding.
How do leap years affect a 365/365 loan?
It depends on the contract. Some lenders keep dividing by 365 and charge 366 days of interest, which adds one extra day; others divide by 366 so the year still equals the quoted rate. The difference on a typical balance is small. This calculator does not model leap years. Check the definitions section of your loan agreement for the exact rule.
Is 365/365 the same as a standard monthly loan?
On average, yes. With an average month of 365/12 days, the monthly rate is the annual rate divided by 12, which matches a standard 30/360 schedule. In real billing, actual/365 charges slightly more in 31-day months and less in February, so individual payments' interest portions vary. Over a full year the totals come out essentially the same.
What is actual/365 fixed?
It is another name for the 365/365 convention: actual days elapsed are counted, and the daily rate is based on a fixed 365-day year. It appears in loan agreements and bond documents. The fixed part signals that the divisor stays 365 even in a leap year. In a leap year this means one extra day of interest at the 365-day daily rate.
Which day-count method do mortgages use?
Many U.S. residential mortgages compute monthly interest as the annual rate divided by 12 on the prior balance, which behaves like 30/360. Commercial real estate loans more often use actual/360. Your note and loan estimate describe how interest is calculated. If you are comparing a residential and a commercial loan, convert both to an effective annual rate first so the comparison is fair.
Does a 365/365 loan have a lower payment than a 365/360 loan?
Yes, slightly. On the illustrative loan, the 365/365 payment is $2,212.27 versus $2,225.29 under 365/360, a difference of $13.02 a month. Over the full term that small gap adds up to the savings figure. Run your own loan amount and rate to see the gap. On larger commercial balances the monthly difference becomes more noticeable, and over many years it adds up to a meaningful sum.
Sources
- Regulation Z (Truth in Lending), 12 CFR Part 1026 — Consumer Financial Protection Bureau. Accessed October 17, 2026.
- Selected Interest Rates – H.15 release — Federal Reserve Board. Accessed October 17, 2026.
- Publication 936, Home Mortgage Interest Deduction — Internal Revenue Service. Accessed October 17, 2026.
We cite primary sources: regulators, central-bank data and federal agencies. Worked examples on this page are our own calculations, last checked October 17, 2026. See our methodology.