Simple Interest Loans

Every customer with SAFCO has a simple interest loan. Reviewing the information on this page can help you understand and answer questions that you may have regarding a simple interest loan.

Daily Interest Calculation:

All simple interest loans accrue interest daily using the calculation below:

Outstanding Principal Balance X Annual Percentage Rate = Annual Finance Charge
Annual Finance Charge / 365 = Daily Interest Charge (commonly called “per diem”)

* Please note that any late fees, insufficient funds (NSF), or other fees will be paid before applying the payment to interest or principal.

Payment Example:

For our example, we will use a $12,000.00 outstanding principal balance, 22% Annual Percentage Rate and a monthly payment on the account is $375.00.


Important information:

  • Interest is calculated daily and there is a per diem based on your current principal balance and the APR on your account
  • The per diem amount changes as the principal balance changes
  • Making payments early every month or paying off your account before the maturity date will save you interest charges
  • Making payment on-time each month as scheduled per the Retail Installment Sales Contract will satisfy the accrued interest due and reduce your principal balance each month
  • Will help you avoid any late fees (where applicable)
  • Your account will be paid off as scheduled and shown in the RISC
  • Enroll in SAFCO’s Recurring Payment Option to have your payment automatically deducted from your account
  • Making late payments may result in a greater portion of your payment being applied to accrued interest resulting in a long time period to pay off your loan.
  • Paying late on a regular basis can significantly increase your final payment that is due on your account
  • Your payment may not be sufficient to cover the accrued interest on your account resulting in no reduction in the principal balance
  • Potential to have a negative impact on your credit
  • You may incur late fees (where applicable)
  • Interest continues to accrue even through deferment periods

Frequently Asked Questions:

1. What is a simple interest contract?

The paperwork that you signed for your vehicle purchase includes a Retail Installment Sales Contract (RISC).  This RISC is a simple interest contract; refer to the top of the contract and the words “Simple Interest” or “Simple Finance Charge.”  The RISC includes simple interest explanation for your account; refer to the disclosures on the back of the contract for additional information.  If you have any questions regarding your account, please contact SAFCO at or (800) 599-8858.

2. How does simple interest work?

Interest rates are expressed as an annual percentage rate (APR), which means the percentage of the borrowed amount (principal) that you will pay each year in interest. You only ever pay interest on the amount that you owe, and that number is calculated every day based on your account balance (this is what it means to “accrue” interest). So the annual rate is divided by 365 (the number of days in a year), and this number is multiplied by your account balance. Each time you make a payment, some of the money is applied to the daily interest that has “accrued” since your last payment, and the rest goes to reduce the amount that you borrowed, or to “pay down” your account. Please note that any late fees, insufficient funds (NSF), or other fees will be paid before applying the payment to interest or principal.

3. How do I calculate how much of my payment will be applied to principal versus interest?

To determine what portion of your payment is applied to principal versus interest, you need to calculate your daily interest charge.  To calculate the daily interest on your account, you need to know your current principal balance, the date of your last payment and the Annual Percentage Rate (APR).

Reference the following example to determine the daily interest on your account from your monthly statement:


4. How does “when I make my payment” affect the daily interest and principal breakdown that is applied to my account?

The amount of your payment that is applied to interest depends on the number of days since you made your last payment, since those “per diem” interest charges are paid first. If your last payment was 30 days ago, any late or insufficient (NSF) fees will be paid first, then 30 days of “per diem” interest charges will be paid, and the rest will be applied to the loan principal balance. If your last payment was 35 days ago, an extra 5 days of interest must be paid, leaving fewer dollars to be applied to your principal balance.

Making a payment early on your account will reduce your interest charge of the payment and apply more to the principal balance. More frequent payments also help reduce your principal balance faster. If you happen to pay late, more interest has accrued on your account and more of your payment will be applied to interest. If you have any questions on the breakdown of your payment, please contact SAFCO at or (800) 599-8858.

5. Can I pay ahead on my account?

Yes; you are able to make additional payments to SAFCO to apply to future payments including interest and principal reduction (up to a maximum of 1 month). Any additional monies will then be applied to the principal balance of the loan automatically.

6. Can I make a principal only payment to my account?

Yes; you are able to make a principal only payment after all late fees, insufficient funds (NSF), or other fees and accrued interest have been paid. The interest portion is the amount of daily interest that has accrued since your last payment.


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