Interest Factor

Definition

• The decimal equivalent for an interest rate on a unit amount for a time period. It is computed by interest rate divided by number of days in basic year times the number of days accrued.

Synonyms
interest rate factor, calculation

Related Terms and Acronyms

• Annual Percentage Rate (APR) — Acronym, Very Important,
  • A yearly rate of interest that includes fees and costs paid to acquire the loan. Lenders are required by law to disclose the APR. The rate is calculated in a standard way, taking the average compound interest rate over the term of the loan, so borrowers can compare loans. In mortgages, it is the interest rate of a mortgage when taking into account the interest, mortgage insurance, and certain closing costs including points paid at closing. There is no APR in an automobile lease; instead, the cost of money is expressed as the money factor.
  ➥ A number used to compare costs associated with mortgage loans and other forms of financing.
• Bank — Definition,
  • An institution that acts as a financial intermediary by receiving money from depositors and lenders and also lending to borrowers.
• Compounding Method — Definition,
  • Used in Bank rate tables. These include: S--Simple interest. A--Compounded annually. H--Compounded semi-annually. Q--Compounded quarterly. M--Compounded monthly. D--Compounded daily.
• Interest (IN, int) — Acronym & Abbreviation,
  • Money paid for the use of borrowed funds, usually expressed as an annual percentage.
  ➥ Bank account transaction code.
• Interest Adjustment Date — Definition,
  • The date one month prior to the beginning of amortization when accrued interest computed on the monies advanced becomes due.
• Interest Rate (IR) — Acronym, Very Important,
  • The rate a lender charges an individual to borrow money.
• Interest-Crediting Methods — Definition,
  • A number of methods used to establish how interest is accrued, owed and dispersed to the parties due.
• Lender — Definition,
  • The bank or mortgage company offering the loan.
• Loan — Definition,
  • Letting another party use something of value temporarily.
• Money Factor — Definition,
  • A leasing term that expresses the cost of borrowing. It is similar to the interest rate paid on a conventional car loan, but it is expressed as a difficult-to-understand fraction. To convert the money factor to a recognizable interest rate, multiply it by 24. For example, a money factor of .00345 x 24 = 9 percent interest. The money factor is negotiable, and consumers who lease a new car should look for a money factor close to the current interest rate charged for new-car loans.
• Mortgage (mtg) — Abbreviation, Important,
  • A mortgage is a contract stipulating a specific real property, typically a residence or building, as collateral for a loan. The mortgage incurs a rate of interest that varies according to term and other features.
• Per Diem Interest — Definition,
  • Interest that is charged daily; usually refers to the partial month's interest that the buyer pays on the mortgage covering the period from the day of closing to the end of the month.
• Periodic Rate — Definition,
  • The interest rate in relation to a specific amount of time. For example, the monthly periodic rate is the cost of credit per month whereas the daily periodic rate is the cost of credit per day.
• Pre-paid Interest — Definition,
  • Interest that a borrower pays before it is due, usually to save taxes.