365/360 Loan Calculator
Calculate the higher effective interest charge that commercial lenders produce by using the 365/360 day-count convention. Enter loan amount, APR, and term to see your true monthly payment and total interest.
The 365/360 method (also called Actual/360) is the day-count convention most US commercial banks use to charge interest on business loans, lines of credit, and commercial mortgages. It computes a daily rate as APR ÷ 360 but applies that rate to the actual 365 days each year — producing about 1.39% more interest annually than a borrower would pay under a standard 365/365 convention. On a $1,000,000 commercial loan at 8% APR, this convention adds roughly $1,100/year in interest the borrower may not have anticipated.
bolt Quick Answer
A 365/360 loan calculator computes the daily interest rate as APR ÷ 360, then multiplies by the actual number of days each month (28–31). Because most years have 365 days but the divisor is 360, the borrower effectively pays interest on 365/360 = 1.0139 times the stated APR. On a $250,000 commercial loan at 7.5% APR over 10 years, the 365/360 method produces a monthly payment of about $2,968 versus $2,968 under 30/360 — a difference of about $980 in total interest over the life of the loan.
tips_and_updates Key Takeaways
- check_circle 365/360 is the dominant US commercial-bank convention; 30/360 and 365/365 are used in residential and bond markets.
- check_circle The 365/360 "hidden" surcharge equals roughly 1.39% extra interest annually (365 ÷ 360 = 1.0139).
- check_circle The convention is legal and widely disclosed — but most borrowers don't notice it without doing the math.
- check_circle On large commercial loans ($1M+), the cumulative cost over 10–25 years can reach $50K–$200K versus 30/360.
- check_circle Always ask your commercial lender to quote interest on a 365/365 (Actual/Actual) basis when comparing offers.
Estimate Your 365/360 Loan Payment & Total Interest
Adjust the loan amount, APR, and term to see how the Actual/360 convention raises your effective interest cost.
Estimated Monthly Payment (365/360)
Loan Breakdown
Get quotes from multiple commercial lenders — no credit impact.
Why Commercial Borrowers Care About 365/360
Industry-Standard Convention
Most US commercial and small-business lenders quote rates on a 365/360 basis by default. Knowing the math lets you negotiate or compare apples-to-apples against any 30/360 quote.
Compounds Over Long Terms
On 25-year commercial mortgages, the 1.39% surcharge compounds into tens of thousands of dollars in extra interest. Worth quantifying before you sign.
Negotiable on Larger Deals
Banks will often quote a 365/365 rate on loans over $1M for relationship borrowers. Knowing the convention is the first step toward asking.
How the 365/360 Day-Count Method Works
Day-count conventions determine how lenders convert a stated annual rate into a daily or monthly interest charge. The 365/360 (Actual/360) method does this asymmetrically: it divides the APR by 360 to get a daily rate, then applies that daily rate to the actual 365 (or 366) days the loan is outstanding. The result is that the borrower pays interest on 365 days but at a rate calibrated as if there were only 360 days — yielding roughly 1.39% more interest per year than a 365/365 (Actual/Actual) convention.
The convention dates to the pre-computer era when banks calculated interest by hand and a 360-day year (twelve 30-day months) made arithmetic easier. After computers rendered the simplification unnecessary, the convention persisted — partly out of inertia, partly because the additional revenue was attractive. Today, the 365/360 method is the dominant choice for US commercial real estate loans, business term loans, and most lines of credit. Residential mortgages typically use 30/360 (compatible with monthly payments) or 365/365.
By the Numbers
On a $500,000 commercial loan at 7.5% APR over 240 months, the 365/360 convention produces about $4,580/month versus $4,560/month under 30/360 — only a $20 monthly difference, but $4,800 cumulative over the loan's life. Scale to a $5M loan and the gap is $48,000.
365/360 vs 30/360 vs 365/365 — Quick Comparison
Three day-count conventions dominate US lending. They produce different effective interest costs even when quoted at the same nominal APR.
- chevron_right 365/360 (Actual/360) — daily rate = APR/360, applied to actual days. Standard in US commercial banking. Highest effective cost — adds ~1.39% annually vs 365/365.
- chevron_right 30/360 (Bond Basis) — assumes every month has exactly 30 days. Standard for residential mortgages and corporate bonds. Produces uniform monthly payments and is roughly equivalent to 365/365.
- chevron_right 365/365 (Actual/Actual) — daily rate = APR/365, applied to actual days. Used for US Treasuries and some commercial loans. Lowest effective cost; closest to true APR.
Sample 365/360 Surcharge by Loan Size
The table below quantifies the extra interest cost of the 365/360 method versus 30/360 across loan sizes. All scenarios assume 7.5% stated APR over 120 months.
| Loan Amount | 365/360 Total Interest | 30/360 Total Interest | Extra Cost |
|---|---|---|---|
| $100,000 | $ 42,840 | $ 42,070 | $ 770 |
| $250,000 | $107,090 | $105,180 | $ 1,910 |
| $500,000 | $214,180 | $210,360 | $ 3,820 |
| $1,000,000 | $428,360 | $420,710 | $ 7,650 |
| $2,500,000 | $1,070,890 | $1,051,770 | $19,120 |
Calculations assume 7.50% stated APR over 120 months. The 365/360 effective monthly factor is APR × (365/360) ÷ 12. Differences scale linearly with loan size and exponentially with term.
How to Negotiate Around the 365/360 Convention
On larger loans (typically $1M+), commercial banks will sometimes agree to a 365/365 or 30/360 quote — especially for relationship clients or when competing for new business. Three negotiation tactics tend to work:
- chevron_right Ask explicitly — request the rate quote in 365/365 terms. Many loan officers default to 365/360 simply because their template generates that way.
- chevron_right Compare term sheets — get quotes from at least two banks and ask each to disclose the day-count convention. Use the cheaper convention as leverage.
- chevron_right Negotiate the spread, not the index — if the bank won't change conventions, ask for a 0.05–0.10% APR reduction equivalent to the 1.39% effective surcharge.
Always read the loan agreement's Calculation of Interest section before signing — it will spell out the convention. Phrases to look for: "Actual/360," "based on a 360-day year," or "daily interest computed on a 360-day basis." If you see these, the calculator above shows your true cost.
365/360 Loan Calculator FAQs
What is the 365/360 method (Actual/360)? expand_more
365/360 is a day-count convention used by most US commercial banks to compute interest on business loans and commercial mortgages. The daily interest rate equals APR ÷ 360, but it's applied to the actual 365 (or 366) days each year. Because the divisor is 360 instead of 365, the borrower effectively pays about 1.39% more interest per year than they would under a 365/365 convention with the same stated APR.
Is the 365/360 method legal? expand_more
Yes. The 365/360 method is legal in the US, widely used, and required to be disclosed in the loan agreement under federal Truth in Lending Act provisions for consumer loans. For commercial loans, disclosure rules are looser — banks usually disclose the convention in the "Calculation of Interest" or "Computation Period" section but rarely highlight the cost difference. The convention itself has been upheld by US courts repeatedly.
Why do banks use 365/360 instead of 365/365? expand_more
Two reasons: (1) historical inertia — pre-computer math was easier with a 360-day year of twelve 30-day months; (2) revenue — 365/360 generates roughly 1.39% more interest per year than 365/365. Banks have continued using the convention because it's standard in commercial markets and competing institutions also use it. Some banks will quote 365/365 on larger loans for negotiation reasons.
How much extra do I pay with 365/360? expand_more
Roughly 365 ÷ 360 = 1.39% extra per year of interest accrual. On a $250,000 loan at 7.5% APR over 10 years, that's about $1,910 in extra interest versus a 30/360 quote at the same nominal APR. On a $1M, 25-year commercial mortgage, the gap can exceed $50,000. The calculator above shows the exact difference for your scenario.
Does 365/360 apply to my home mortgage? expand_more
Almost never. US residential mortgages overwhelmingly use the 30/360 convention (which produces uniform monthly payments roughly equivalent to 365/365). 365/360 is reserved for commercial real estate, business loans, and lines of credit. If you're buying a home, your closing disclosure will use 30/360 or 365/365 — not 365/360.
Can I get my commercial lender to use 365/365 instead? expand_more
Sometimes — especially on larger loans, competitive deals, or for relationship borrowers. Ask explicitly: "Can you quote the rate on a 365/365 basis?" Some banks will, some won't. If they refuse, you can negotiate a slight rate reduction (0.05–0.10% APR) to roughly offset the 1.39% effective surcharge. Always compare term sheets across multiple banks before signing.
More Tools
Other Calculators You Might Need
Amortizing Loan Calculator
View a standard amortization schedule for any fixed-payment loan, with monthly principal-vs-interest split.
Balloon Loan Calculator
Compute monthly payment and final balloon for commercial loans amortized over 15–30 years with shorter actual terms.
Loan Comparison Calculator
Stack two loan offers side-by-side — including different day-count conventions — and see total cost.
Need a commercial loan quote?
Get matched with trusted lenders in minutes. Free service. No obligation. No impact on your credit score to check rates.
Get Pre-Qualified