# New ZealandSimple Loan Interest Calculation

#### Cory

Can anyone help me?
I am not an accountant, but I am a programmer. I have made a program that allows me to calculate and forecast budgets. And, only now have I decided to plug in a loan interest calculator, that shows me each and every single payment to be made and interest charged.
However, I cannot get the numbers to match on the loan as per attachments.

The finance company tells me the method of charging interest (in their exact words):
Interest charges are calculated and charged at the end of each month by multiplying the average daily balance for the preceding month by a interest rate. The interest rate is calculated by dividing the annual interest rate by 48.

The contract says 48 monthly payments of 263.24 starting from 14 January 2014.
Total amount of payments \$12,635.52
Annual interest rate(s): 16.9% fixed for the 48 months.
Total interest charges: \$3,430.46
\$5.00 per month for account maintenance fee.

I use the calculation (which I tried to ascertain from their jargon):

interest = average_daily_balance x number_of_days x daily_interest_rate
which I get 127.39

for the first interest charge I get
average_daily_balance = 8875.58
number_of_days = 31
daily_interest_rate = (16.9 / 365) / 100 OR 16.9% / 365

nothing I do will resolve the numbers, any ideas??  #### kirby

VIP Member
First, look at this analytically. The March 14th 2014 charge for interest was \$112.84. Now the April interest charge was HIGHER than March's EVEN THOUGH the April payments were HIGHER (total \$332) than those of March (\$264). That will give you a lower daily average balance in April than March. Should have had a lower interest in April given the higher payments. But again April's interest was higher than March's. So don't bother trying to calculate this - go ask Finance Company to explain cause it makes no sense.

#### Cory

Thanks Kirby, I've talked to them multiple times and they're all over the place with their answers. I have the right under New Zealand law to be supplied the interest calculations, but I wanted to make sure it wasn't just my lack of understanding before I went that direction.

However, I think I may have found what the calculation is based on. It seems their interest is calculated based on if I were simply paying the contract amount of 263.24 per month only--rather then calculated by the average daily balance the contract interest calculation says. When I do that calculation, I seem to get consistently close to their interest rate. Can anyone confirm this?