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I have a loan. The initial balance was $39,488.00. The interest rate is 12.9%; interest is compounded daily.

I have made all payments on time so far (early even), but some months no portion of my primary payment is being paid towards the principal.

My servicer is telling me this is due to the daily compounding of interest, and that if I pay too early, it's possible my loan will never be paid off.

I am of the belief that no matter what, if my payment is made on time, some portion of my monthly payment should be applied to the principal.

Is my loan servicer calculating my interest and applying my payments correctly?

The payment due is $497.02. I have been adding $2.98 to the payments, for a total of $500 per month being paid to this loan.

Below are how the payments are reflected on my billing statements:

  • Statement Date: 4/5/25. Due Date: 4/20/25. Payment made on 3/13/25: $165.06 principal $334.94 interest.

  • Statement Date: 5/5/25. Due Date: 5/20/25. Payment made on 4/10/25: $110.86 principal $389.14 interest.

  • Statement Date: 5/26/25. Due Date: 6/20/25. Payment made on 5/19/25: $2.98 principal $497.02 interest.

  • Statement Date: 6/25/25. Due Date: 7/20/25. Payment made on 6/10/25: $151.68 principal $348.32 interest.

  • Statement Date: 7/26/25. Due Date: 8/20/25. Payment made on 7/9/25: $99.69 principal $400.31 interest.

  • Statement Date: 8/26/25. Due Date: 9/20/25. Payment made on 8/19/25: $2.98 principal $497.02 interest.

  • Statement Date: 9/25/25. Due Date: 10/20/25. Payment made on 9/11/25: $115.85 principal $384.15 interest.

  • Statement Date: 10/26/25. Due Date: 11/20/25. Payment made on 10/9/25: $115.65 principal $384.35 interest.

  • Statement Date: 11/25/25. Due Date: 12/20/25. Payment made on 11/6/25: $116.80 principal $383.20 interest.

  • Statement Date: 12/26/25. Due Date:1/20/26. Payment made on 12/8/25: $63.38 principal $436.62 interest.

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    Not an answer to the question but if you get paid on a bi-weekly or semi-monthly basis, you should make a payment every time you get paid. This will reduce the interest, especially with a daily compounded loan. If you can refinance to a monthly-compounded loan at the same (or even slightly higher) rate, that can help to. Commented 2 days ago
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    "that if I pay too early, it's possible my loan will never be paid off" this is highly questionable. Unless there is an early payment penalty, this doesn't make sense. All things equal, the earlier you pay the better. Lenders make more when you pay later so they don't want you to pay too early. Check your agreement for details. Commented 2 days ago
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    Why does the statement date switch from the 5th to the 25/26th of each month between the 2nd and 3rd statements? Commented yesterday
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    How do you make the payments? Are the payment dates the dates you made them (they left your account) or the date they were recorded by the loan provider? Commented yesterday
  • jcaron payment date is the date I kick off the payment on the Servicer"s site. The date chosen has just been my first pay period of the month - a little later then pay day due to my own forgetfullness on the dates in question. Not sure about statement date switching - just realized that when I posted this question; time to call them again I suppose. Commented 18 hours ago

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I am going to ignore trying to calculate the daily interest and focus on the two pairs of transactions that you are unsure about in the question.

Statement Date: 5/5/25. Due Date: 5/20/25. Payment made on 4/10/25: $110.86 principal $389.14 interest.

Statement Date: 5/26/25. Due Date: 6/20/25. Payment made on 5/19/25: $2.98 principal $497.02 interest.

a quick calculation shows that the loan has 180 payments, and the first month the payment would have been:

  • $424.50 interest
  • $72.52 principal
  • $2.98 extra principal.

Because this wasn't the first payment, the interest would have been a little lower and the principal payment a little higher.

But you made an error. There were more than a month of days between payments. That mean the daily interest caused the amount of interest you owed to exceed the amount of money you sent them. You forfeited some the amount of principal you were gaining by making other payments earlier. You may have noted that the amount of money you still owed went up.

Statement Date: 7/26/25. Due Date: 8/20/25. Payment made on 7/9/25: $99.69 principal $400.31 interest.

Statement Date: 8/26/25. Due Date: 9/20/25. Payment made on 8/19/25: $2.98 principal $497.02 interest.

This is the same thing. You made a payment more than 30 or 31 days later. Again you owed more in interest than you sent them.

This is the issue with trying to make non-periodic payments with a daily interest rate. If you keep this up the pattern will continue. Some months you appear to get ahead, and other months you fall behind. The big problem will be if you fall too far behind you could trigger them to foreclose or repossess the collateral.

You need to set up automatic payments to keep to the schedule.

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    calculator.net/… matches your analysis, with over $50k paid in interests over 15 years. "You need to set up automatic payments to keep to the schedule.". Absolutely. With 12.9% interest, it only takes 6 years for the loan to double. Commented 2 days ago
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    Depending on the loan, automatic payments can also reduce the variability in other ways. My mortgage payment, for example, is due on the 1st of each month, but if it's handled by automatic payment, I can schedule the payment for any day between the first and the 15th and it counts as being made on the first (that is, no additional interest is accrued on amount of the "late" payment, which would normally mean I'd earned a couple extra bucks of interest two weeks later). And when it falls on a weekend and the payment is debited as late as the 18th, it's still treated as on time. Commented 2 days ago
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    @ShadowRanger -- wow, that feels unusually generous to me. I wonder if it's by regulation or something? My experience with autopay is that it often comes with warnings that everything is still due when it's due, and if anything goes wrong with their autopay it's still your problem. Commented 2 days ago
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    @GlennWillen: I think if something went wrong (e.g. bank refuses the transfer, my account has insufficient funds, whatever), it would be on me, but mere business day scheduling issues are explicitly not a problem. shrugs Commented 2 days ago
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    This answer is all fine except the conclusion that the variation in payment dates will ever cause a problem. OP is making every payment before the deadline, and as long as that continues he won't ever be at risk of default. (Note: the deadline is not "one month after the previous payment was made", it is "one month after the previous deadline" -- that's how there can be more than a month between some payment pairs and everything is still fine) Commented yesterday
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The calculations seems more or less correct. I did a quick spreadsheet and it is about the correct amounts. Note that:

  1. the daily interest gets calculated according to payment dates (not the statement date).
  2. Any unpaid interest goes towards principal amount.

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Sorry about date format and that the calculation is off a few dollars on the unpaid interest (due to rounding errors in my calculation I believe).

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Daily interest is usually calculated based on the outstanding principal, the annual interest rate, and the number of days the amount remains unpaid. The most common method is simple daily interest, unless the agreement specifies compounding.

A typical formula looks like this:

Daily Interest = (Principal × Annual Interest Rate) ÷ 365 Total Interest = Daily Interest × Number of Days

Example: If the principal amount is 100,000 and the annual interest rate is 12%:

Annual interest = 100,000 × 12% = 12,000 Daily interest = 12,000 ÷ 365 ≈ 32.88 per day

If the amount is outstanding for 10 days: Interest = 32.88 × 10 ≈ 328.80

So if your calculation is close to this value, it is likely being calculated correctly under a simple daily interest method.

In real business scenarios, accounting software often automates this to avoid manual errors. For example, in cloud accounting tools like Giddh, interest calculations are typically derived from the ledger balance and the defined interest rate, applying the daily calculation consistently based on transaction dates. This helps ensure accuracy, especially when payments are made mid-period.

If your result differs significantly, it’s worth checking:

Whether the interest is simple or compounded

The day count basis (365 vs 360)

Whether partial payments are reducing the principal during the period

Once those factors are aligned, daily interest calculations usually become clear and predictable.

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    OP wrote that the interest compounds daily (which I find quite unusual, but that’s probably a country thing). A bit puzzled by the combination of daily compounding, monthly statements with dates that change, fixed monthly payments… Commented 19 hours ago
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Formulas for compounded interest:

Daily interest rate = yearly interest rate ^ 1/365

Daily interest = previous day's amount owed x daily interest rate

The servicer's statement is nonsense. As you are always ahead with your payments, those longer payment periods will eat up some of the extra progress you made, but you can't ever fall behind what you'd have paid off if you always paid just in time.

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