Periodic Rate

A periodic interest rate is one that can be applied to a loan or earned on an investment over a given time frame. Although interest rates are usually compounded more frequently than once a year, lenders normally quote them on an annual basis. The yearly interest rate is divided by the quantity of compounding periods to produce the periodic interest rate.

Mortgage interest typically accumulates once per month.

The interest rate is multiplied by the amount the borrower owes at the end of each day since credit card issuers often base their interest calculations on a daily periodic rate.