Loan Interest Calculator: Monthly Rest vs Daily Rest
Calculation Results
Key Comparison
Monthly Rest Interest: Interest calculated on previous month’s balance
Daily Rest Interest: Interest calculated daily based on current balance
You save RM4.70 in the first month with Daily Rest
Savings compound significantly over the loan tenure
Understanding Monthly Rest vs Daily Rest Interest
Monthly Rest Interest
Interest is calculated based on the outstanding balance from the previous month. The interest amount remains the same throughout the month regardless of when you make your payment.
Daily Rest Interest
Interest is calculated daily based on the outstanding balance from the previous day. When you make a payment, the principal reduces immediately, leading to lower interest charges for the remaining days of the month.
Which is Better?
Daily Rest Interest benefits you if:
- You make payments early in the month
- You make extra payments towards your principal
- You want to minimize total interest paid
Monthly Rest Interest may be simpler if:
- You always pay exactly on the due date
- You don’t make extra payments
Calculation Formulas
Monthly Rest: Interest = Principal × (Annual Rate ÷ 12)
Daily Rest: Daily Interest = Principal × (Annual Rate ÷ Days in Year)
Monthly Rest vs Daily Rest Interest Calculator: Which Saves You More Money?
When taking out a home loan, personal loan, or car loan, understanding how your interest is calculated can save you thousands over the loan tenure. Two common methods banks use are:
✅ Monthly Rest Interest – Interest calculated on the previous month’s outstanding balance.
✅ Daily Rest Interest – Interest calculated daily based on the current balance.
This guide includes:
✔ How each method works (with examples)
✔ A free interactive calculator to compare both
✔ Which method saves more money
✔ FAQs on loan interest calculations
Monthly Rest vs Daily Rest Interest: Key Differences
| Feature | Monthly Rest Interest | Daily Rest Interest |
|---|---|---|
| Calculation Basis | Based on the daily outstanding balance | Based on daily outstanding balance |
| Interest Charged | Fixed for the entire month | Changes daily (lower if paid early) |
| Best For | Borrowers who pay on the due date | Borrowers who pay early/make extra payments |
| Total Interest | Slightly higher | Lower (saves money long-term) |
| Flexibility | Less flexible | More flexible (reduces interest faster) |
How Interest is Calculated (With Example)
Scenario:
- Loan Amount: RM500,000
- Interest Rate: 5% p.a.
- Tenure: 20 years
- Monthly Installment: ~RM3,299.78
- Payment Date: 15th of the month
1️⃣ Monthly Rest Interest Calculation
Interest is fixed for the month based on the previous month’s balance.
Formula: Monthly Interest=Principal×Annual Rate/12
Month 1 Interest: RM 500,000×5%/12 = RM 2,083.33
2️⃣ Daily Rest Interest Calculation
Interest is recalculated daily based on the remaining balance.
Formula (per day): Daily Interest=Principal×Annual Rate/Days in Year (360 or 365)
Step 1: Interest from 1st to 15th June RM500,000×5%/360×15=RM1,041.67
Step 2: New principal after payment RM500,000−(RM3,299.78−RM1,041.67)=RM497,741.89
Step 3: Interest from 16th to 30th JuneRM497,741.89×5%/360×15=RM1,036.96
Total Month 1 Interest: RM1,041.67+RM1,036.96=RM2,078.63RM1,041.67+RM1,036.96=RM2,078.63
Comparison: Monthly Rest vs Daily Rest
| Method | Month 1 Interest | Savings |
|---|---|---|
| Monthly Rest | RM2,083.33 | – |
| Daily Rest | RM2,078.63 | RM4.70 |
💡 Key Takeaway:
- Daily Rest saves money if you pay early.
- Over 20 years, these small savings compound significantly!
Which is Better? Monthly Rest or Daily Rest?
Choose Daily Rest If You:
✔ Pay early in the month
✔ Make extra repayments
✔ Want to minimize total interest
Choose Monthly Rest If You:
✔ Always pay on the due date
✔ Don’t make extra payments
Tips to Maximize Savings
- Pay Early – Even a few days early reduces interest.
- Make Extra Payments – Directly lowers principal faster.
- Avoid Late Payments – Daily Rest penalizes delays more.
FAQ:
1. Does Daily Rest always save money?
✅ Yes, if you pay early. Late payments can cost more.
2. How much can I save with Daily Rest over 20 years?
✅ Thousands! Early payments reduce principal faster.
3. Do all banks offer Daily Rest loans?
✅ Most do, but check terms—some have restrictions.
4. Can I switch from Monthly to Daily Rest?
❌ Usually no, but you can refinance.
5. Which method is more common?
✅ Daily Rest is becoming standard for home loans.
Final Verdict
- Daily Rest Interest is better for disciplined borrowers who pay early.
- Monthly Rest Interest is simpler but costs more long term.
Before taking a loan, ask:
🔹 Is it Daily or Monthly Rest?
🔹 Can I make extra repayments?
🔹 Are there early settlement penalties?
Use our free Monthly Rest vs Daily Rest Interest Calculator to find your best option! 🚀
