Monthly Compounding Interest Calculator
The following on-line calculator allows you to automatically determine the amount of monthly compounding interest owed on payments made after the payment due date.
To use this calculator you must enter the numbers of days late, the number of months late, the amount of the invoice in which payment was made late, and the Prompt Payment interest rate, which is pre-populated in the box. If your payment is only 30 days late or less, please use the simple daily interest calculator.
Monthly compounding interest – the formula
This is the formula the calculator uses to determine monthly compounding interest:
P(1+r/12)n * (1+(r/360*d)) -P
- P is the amount of principal or invoice amount;
- r is the Prompt Payment interest rate;
- n is the number of months; and
- d is the number of days for which interest is being calculated.
The first part of the equation calculates compounded monthly interest. The second part of the equation calculates simple interest on any additional days beyond the number of months.
For example, if the amount owed is $1,500, the payment due date is April 1, the agency does not pay until June 15, and the applicable interest rate is 6%, interest is calculated as follows:
$1,500(1+.06/12) 2 * (1+(0.06/360*15))-$1,500 = $18.83