1. What is Line of Credit Interest?

Line of credit interest is the cost of borrowing money from a revolving credit line. It's calculated based on the amount drawn, the annual interest rate, and the number of days the balance is outstanding.

2. How Does the Calculator Work?

The calculator uses the line of credit interest formula:

Where:

• \( Drawn\ Balance \) — Amount of credit currently used (USD)
• \( Annual\ Rate \) — Annual interest rate (in decimal form)
• \( Days \) — Number of days the balance is outstanding

Explanation: The formula calculates daily interest by dividing the annual rate by 365, then multiplies by the outstanding balance and number of days.

3. Importance of Interest Calculation

Details: Understanding interest calculations helps borrowers estimate costs, compare credit options, and make informed financial decisions about credit usage.

4. Using the Calculator

Tips: Enter the current balance drawn from your line of credit, the annual interest rate (as a decimal), and the number of days the balance has been outstanding. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert APR percentage to decimal?
A: Divide the percentage by 100 (e.g., 5.25% becomes 0.0525).

Q2: Does this calculator account for compounding?
A: This calculates simple daily interest. Some lines of credit compound interest monthly.

Q3: What's the difference between drawn balance and credit limit?
A: Credit limit is the maximum you can borrow, while drawn balance is the amount currently borrowed.

Q4: Are there fees not included in this calculation?
A: Some lines of credit have annual fees or transaction fees that aren't reflected in the interest calculation.

Q5: How can I reduce my interest charges?
A: Pay down your balance more frequently or negotiate a lower interest rate with your lender.