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365/360 Loan Calculator
365/360 Loan Calculator
Hidden Day-Count Cost (360 vs 365)
$260.42
Day-Count Analysis
On a $250,000 loan at 7.5% held for 365 days, the 360-day convention charges $19,010.42 in interest versus $18,750 on the Australian-standard 365-day basis — a hidden premium of $260.42. A 360-based quote of 7.5% is really 7.60% per year over a full 365-day year, so always compare day-count-quoted facilities against that higher effective rate, not the headline number.
Educational comparison of day-count conventions only. Actual commercial loan pricing depends on the lender's documented basis and your facility agreement; this is not credit advice.
Why the Day-Count Convention Changes Your True Loan Cost
Most Australian borrowers assume interest is calculated the same way everywhere, but commercial and business facilities often reveal a hidden difference in their fine print: the day-count convention. The 365/360 split is the classic example. Under the standard Australian convention, your daily interest is the annual rate divided by 365, so you pay exactly the quoted rate over a full year. Under the 360 convention — imported from US and international commercial lending practice — the same annual rate is divided by 360, meaning each day accrues interest on a slightly larger daily slice. Over a calendar year the 360 basis effectively charges you about 13½ days of extra interest, raising the true annual cost by roughly 1.4% of the headline rate. This matters most for business overdrafts, invoice finance, equipment loans and other facilities where the lender quotes daily-accrued interest. Two lenders quoting the identical 8% rate can differ materially in true cost purely by day-count basis. For ordinary Australian home loans, residential mortgages use daily accrual on a 365-day year, so this issue rarely bites. But for tradies funding a vehicle, small business owners holding a facility, and investors evaluating commercial finance quotes, knowing the convention lets you compare like-for-like instead of being seduced by a headline rate.
Daily Interest Under Two Calendar Assumptions
Daily interest is computed as outstanding balance × annual rate ÷ day-count denominator. On the 365 basis — the standard across Australian residential and most business lending — a $250,000 facility at 7.5% accrues 250,000 × 0.075 ÷ 365 = $51.37 per day. Over 365 days you pay $18,750, exactly the quoted 7.5%. On the 360 basis the same facility accrues 250,000 × 0.075 ÷ 360 = $52.08 per day. Held for a full calendar year (365 days) the total interest is $19,010, or an effective 7.60% — a hidden premium of about $260 on this facility alone. The calculator exposes this in two ways. First it computes the actual interest charged over your holding period on both bases, so the dollar premium is visible. Second it converts a 360-based quote to its true equivalent annual rate: equivalent rate = quoted rate × 365/360. A 9% quoted on a 360 basis is really 9.125% on an Australian-standard 365 basis, which is the number you should compare against other quotes. The tool also shows how much of your stated monthly payment is interest-only versus extra principal, so you can see whether periodic payments are actually reducing the debt or merely servicing the accrued interest.
Expert Insights
Always Ask for the Day-Count Basis in Writing
Australian law does not force lenders to highlight their day-count convention in facility summaries. Before signing a commercial quote, ask: 'Is interest calculated on a 365 or 360-day year?' If the lender uses 360, convert the headline rate by multiplying by 365/360 and compare the result to competing 365-based quotes. A quote that 'wins' on headline can lose on effective rate.
The Premium Compounds on Large, Long-Held Balances
The extra interest from a 360 basis is proportional to both balance and holding period. On a $500,000 facility held for a year at 9%, the convention difference exceeds $600 — real money. For short, small facilities the difference is trivial; for large working-capital lines that stay drawn, it quietly adds up to thousands a year, so negotiate on effective rate rather than headline.
Watch for the Double-Dip in Payment Timing
Some facilities combine a 360 accrual basis with monthly payment dates, meaning each month you pay interest on roughly 30.4 days while the lender treats months as flat 1/12 slices. If your payment due date drifts against the accrual calendar, you can be paying for a day you have not yet borrowed. Confirm how unpaid interest is capitalised and when payments are applied to avoid paying twice for the same period.
Actionable Tips
- 1
Put Competing Quotes on a Common Effective Rate
Collect three quotes, identify each one's day-count basis, and convert every quote to a 365-equivalent annual rate before comparing. Enter each effective rate into this tool to see the dollar difference over your intended holding period. Ranking by effective rate, not headline rate, can save hundreds on a single facility.
- 2
Time Repayments Against the Accrual Calendar
If your facility allows it, make principal repayments just after interest has accrued and been charged — not before. Paying down at the start of an interest period means your reduced balance accrues less going forward; paying at the end captures the same interest either way but keeps cash working longer. Even small timing shifts compound over a year of daily accrual.
- 3
Re-Quote Your Existing Facility at Renewal
If you have held a 360-based facility for years, use this calculator to quantify the cumulative premium, then raise the effective rate at renewal. Many lenders will match or beat a competitor's 365-based quote when shown the arithmetic, and even switching basis on the same headline rate immediately removes the hidden uplift.
Real-World Examples
The Tradie Who Caught the Hidden Uplift
Sam's plumbing business quoted 8.4% on a 360 basis against a competitor's 8.5% on 365. The 8.4% looked cheaper, until Sam's accountant converted it: 8.4 × 365/360 = 8.52% effective, making it more expensive than the rival quote on the bank's $150,000 overdraft. Over the year the switch saved roughly $180, and Sam now asks about day-count basis before discussing rate.
Invoice Finance That Priced Itself Out
Mei ran an export business using a 90-day invoice finance line at 9.0% quoted on 360. Because the line stayed drawn almost continuously, her effective annual cost was 9.125%, about $250 more per $200,000 than the headline suggested. At review her broker found a 365-based line at 9.05% flat — cheaper on effective terms — and the switch required no change to her cashflow rhythm.
The Equipment Loan That Didn't Matter
Jake financed a $60,000 excavator over three years at 7.2%, quoted on 360. The effective uplift was 7.3%, but because the loan amortised and his balance fell every month, the real dollar difference over the life of the loan was under $120. Jake's lesson: the 365/360 question is critical for drawn facilities and interest-only lines, but for small amortising equipment loans the headline rate comparison dominates the decision.
Glossary of Terms
- Day-Count Convention
- The rule a lender uses to convert an annual rate into a daily rate — most commonly actual/365 in Australia or actual/360 in international commercial practice.
- Effective Annual Rate
- The true yearly cost of a loan once accrual-basis quirks like the 360-day year are converted back to a standard calendar basis for comparison.
- Accrued Interest
- Interest that has built up day by day but not yet been paid; on daily-accrued business facilities it is charged at each payment date or capitalised.
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Ivy Sinclair-Wren
Financial Chaos Analyst
Ivy Sinclair-Wren is a Financial Chaos Analyst covering investing, AI, wealth psychology, and the emotional consequences of opening finance apps during market crashes. Based in Melbourne, she specializes in demystifying the Australian tax code and helping users navigate the intersection of spreadsheet logic and human irrationality.