How to calculate interest and daily installments on a daily collection loan
On a daily collection loan, add the interest or charge to the principal and divide by the number of installment days. For example, a ₹10,000 loan with a 20% flat charge for 100 days means ₹12,000 repayable, or ₹120 a day. Always check the effective cost too, because short terms make flat charges expensive.
What is a daily collection loan and how is its interest usually set?
A daily collection loan is a small loan repaid in fixed daily installments, usually over 60 to 120 days. A collection agent visits the borrower, often a shopkeeper, vegetable vendor or daily-wage earner, and takes the installment in cash or by UPI. Because the money comes back in small pieces every day, the lender can recycle capital quickly.
Most daily finance lenders do not quote an annual interest rate. They quote a flat charge for the whole term, for example "₹2,000 on a ₹10,000 loan for 100 days", or a rate such as "2% for every 10 days". Both are fine as long as the lender and the borrower understand what the total repayment will be. The rest of this guide shows how to turn any such quote into a daily installment and into a comparable yearly cost.
How do you calculate the daily installment?
The basic formula has three steps. First, work out the total interest or charge for the term. Second, add it to the principal to get the total repayable. Third, divide the total repayable by the number of installment days.
Formula: daily installment = (principal + total interest) ÷ number of days. Total interest on a flat basis = principal × flat charge % for the term.
For example, take a ₹10,000 loan with a 20% flat charge for 100 days. Interest is ₹10,000 × 20% = ₹2,000. Total repayable is ₹10,000 + ₹2,000 = ₹12,000. The daily installment is ₹12,000 ÷ 100 = ₹120.
If the lender instead quotes a rate per period, convert it first. For example, 2% for every 10 days over a 100-day loan is ten periods of 2%, which is 20% in total on a flat basis. The answer is the same ₹12,000 repayable.
- Always fix the number of installments before you quote the installment amount.
- Round the installment to a convenient figure only if you adjust the last installment to match the total.
- Write the total repayable on the loan card so the borrower knows the full amount.
What do typical daily loans look like? A reference table
The table below shows five example loans. These are illustrations of how the arithmetic works, not recommended rates. Interest as a percentage of the loan is the interest divided by the principal. The yearly flat equivalent multiplies that by 365 and divides by the number of days, so you can compare it with loans that quote an annual rate.
| Loan amount | Daily installment | Days | Total repayable | Interest | Interest as % of loan | Yearly flat equivalent |
|---|---|---|---|---|---|---|
| ₹5,000 | ₹60 | 100 | ₹6,000 | ₹1,000 | 20% | 73% |
| ₹10,000 | ₹110 | 100 | ₹11,000 | ₹1,000 | 10% | 36.5% |
| ₹10,000 | ₹120 | 100 | ₹12,000 | ₹2,000 | 20% | 73% |
| ₹15,000 | ₹150 | 120 | ₹18,000 | ₹3,000 | 20% | About 60.8% |
| ₹20,000 | ₹230 | 100 | ₹23,000 | ₹3,000 | 15% | 54.75% |
What is the real, effective cost of a daily loan?
The flat charge hides one important fact: the borrower repays part of the principal every day, so they are using less and less of your money as the days pass. A 20% flat charge on 100 days looks small, but the borrower has the full ₹10,000 only on day one.
For the ₹10,000 loan repaid at ₹120 a day for 100 days, the daily rate that makes the repayments equal the loan works out to roughly 0.37% per day. Multiplied by 365, that is about 136% a year on a reducing-balance basis. This is why very short-term loans carry high annualised figures even when the rupee charge looks modest.
This does not make daily lending wrong. The lender pays for daily agent visits, cash handling and a higher default risk. But a responsible lender should know the effective figure, explain the total repayable clearly, and make sure the borrower can afford the daily amount.
How do processing fees, Sunday skipping and part-payments change the numbers?
A processing fee deducted at disbursement raises the effective cost. For example, on a ₹10,000 loan with a 2% fee of ₹200, the borrower receives ₹9,800 but still repays ₹12,000. The real charge is ₹2,200 on ₹9,800, which is about 22.4% rather than 20%.
Sunday skipping changes the calendar, not the maths. If you collect six days a week, 100 installments take roughly 17 weeks, or about 117 calendar days, so the maturity date is later than a simple "100 days from today". Decide whether your term counts installments or calendar days, and say so on the loan card.
Part-payments and missed days change how the balance falls. If a borrower pays ₹60 instead of ₹120 on a day, ₹60 is carried as arrears. Keep arrears visible, separate from penalties, so the borrower can see exactly what remains.
How can you avoid calculation mistakes in the field?
Manual calculation goes wrong in predictable places: the wrong day count, a forgotten Sunday, a rounded installment that never adds up to the total, or a penalty added twice. A fixed set of loan plans (for example ₹5,000, ₹10,000 and ₹20,000 at set terms) removes most of these errors.
Software such as DailyRupee builds the installment schedule automatically from the principal, charge and days, can skip Sundays, shows a live preview before you sanction the loan, and lets you save reusable loan plans. Whether you use software or a notebook, calculate the total repayable before you hand over any cash and show it to the borrower.
How to calculate a daily collection loan installment
Fix the principal and the term
Decide the loan amount and the number of installment days, for example ₹10,000 over 100 days.
Work out the total interest
Multiply the principal by the flat charge for the term. A 20% charge on ₹10,000 is ₹2,000.
Add interest to the principal
The total repayable is ₹10,000 plus ₹2,000, which is ₹12,000.
Divide by the number of days
The daily installment is ₹12,000 divided by 100 days, which is ₹120.
Check the effective cost and the maturity date
Account for any processing fee and skipped Sundays, note the maturity date, and show the total repayable to the borrower.
Frequently asked questions
How do I calculate the daily installment for a loan?
Add the total interest to the principal and divide by the number of installment days. For example, ₹10,000 plus ₹2,000 interest is ₹12,000, and over 100 days that is ₹120 a day.
Is a 20% flat charge for 100 days the same as 20% a year?
No. A 20% flat charge for 100 days is about 73% a year on a flat basis, because the term is only 100 of 365 days. On a reducing-balance basis the yearly figure is higher still.
Should Sundays be counted in a daily loan?
It depends on your rules. Many lenders skip Sundays and count only collection days, which pushes the maturity date later. Whatever you choose, write it on the loan card.
What happens if a borrower pays less than the daily installment?
The unpaid part becomes arrears and is carried forward. Track arrears separately from any late fee so both you and the borrower can see what is outstanding.