The Daily Simple Interest method enables lenders to accrue interest on loans daily by applying a periodic rate to the outstanding balance. Under this method, the lender's calculations and your paying habits determine the amount of total interest due and the amount of the final payment. For example, if you make any periodic payment before its due date (for example, on the 12th when the scheduled due date is the 15th) and then make each subsequent payment on the same date in each succeeding month (that is, you always pay on the 12th of the month), you will pay less interest and should get a rebate after your last payment. This advantage occurs because the loan balance declines more rapidly and less interest accrues daily.

In contrast, if you make payments after the scheduled due date (for example, on the 18th of the month when the scheduled due date is the 15th), even if they are made during a grace period, you'll end up paying more and will owe an additional amount after the last scheduled payment. Depending on state law, you may or may not be subject to late charges for payments after any grace period in addition to the interest that has accrued.