Why the interest on your statement changes every month: the 365-day rule

Open the repayment history in a banking app and look down the interest column. On a fixed promotional rate, with the balance falling by exactly the same amount every month, the interest still goes up and down: a little higher one month, noticeably lower in February. Most borrowers assume a rounding quirk or a mistake. It is neither. Vietnamese banks are required to count interest by the day, and months do not have the same number of days.

The rule: a daily rate on a 365-day year

Since 1 January 2018, interest on loans and deposits in Vietnam has been governed by Circular 14/2017/TT-NHNN of the State Bank. It replaced an older decision that used a 360-day year, and it says three things that matter to a borrower.

1. The rate is stated per year, and a year is 365 days. Not 360, and not 366 in a leap year.
2. Interest accrues every day. Each day’s interest is the balance actually outstanding that day, multiplied by the annual rate, divided by 365.
3. The interest for a period is the sum of the days in it. Where the balance does not change, that reduces to balance × days × annual rate ÷ 365.

The circular also lets the bank and the borrower choose which end of the period counts: either from the day after disbursement up to and including the repayment day, or from the disbursement day up to the day before repayment. Either way the number of days charged is the same; what changes is which day’s balance is used. The contract has to say which one applies.

What that does to a single month

Take 2.4 billion dong at 11.5% a year. Divided by twelve, the textbook monthly interest is 23,000,000 dong. Counted the way the circular requires, it depends on the month:

A swing of 2.27 million dong between a February and a long month, on a rate that never moved. On a household budget planned to the last hundred thousand, that is worth knowing in advance.

The worked example, month by month

The loan used across this site is 2.4 billion dong over twenty years, equal principal, 6.9% for twelve months and then 11.5%. Suppose it is disbursed on 10 January 2027 and each instalment falls due on the tenth. The table compares the interest the loan inspector shows, which uses the annual rate divided by twelve, with the interest counted by the day.

Two things stand out. The first is that the reset in month thirteen lands on a 31-day period, so the first floating instalment is 419,041 dong higher than the figure in the tool. If the bank’s own illustration was also built on rate ÷ 12, the first statement after the promotion will look slightly worse than promised, and this is why.

The second is that it washes out. Over the first twelve months the tool’s figure totals 161,805,000 dong of interest and the daily count totals 161,787,041 dong, a difference of under eighteen thousand. Twelve months on a 365-day year is, after all, a year.

Leap years are where the money is

Because the year is fixed at 365 days, a leap year contains one day more than the divisor allows for. The 29th of February is charged at the full daily rate, and nothing takes it back. A twenty-year loan drawn in January 2027 runs through five of them, in 2028, 2032, 2036, 2040 and 2044.

Across the full term, the daily count comes to 2,665,107,041 dong of interest against 2,663,630,000 dong on rate ÷ 12. The difference is 1,477,041 dong, about 0.06% of the total. That is small enough that the calculator does not model it, and the methodology page says so. It is also large enough that a borrower who has reconciled their statements against a spreadsheet using rate ÷ 12 will find the bank is consistently ahead, and will now know why.

What the contract has to tell you

The lending circular, Circular 39/2016/TT-NHNN as amended, makes the calculation method part of the rate itself. Article 13 requires the agreement on interest to state both the rate and the method of calculating it. Where a contract expresses the rate any other way, for example as a monthly percentage or as flat interest on the original amount, it must also state the equivalent rate per year on the actual outstanding balance, on a 365-day year.

That last requirement is more useful than it sounds. A loan advertised at “0.75% a month flat” has to be translated, in the contract, into a reducing-balance annual rate. On consumer and car finance the translated figure is often close to double the headline, which is the comparison worked through in equal principal or equal instalments.

When a payment is late

The same daily count is used for late payment, and here the circular sets ceilings. If an instalment is missed, principal that becomes overdue can be charged at no more than 150% of the rate in force, and interest that was due but not paid can be charged no more than 10% a year for the days it is late.

On the worked example, missing the month thirteen instalment of 31,850,000 dong for thirty days would cost, at those maximums:

• 10,000,000 dong of overdue principal at up to 17.25% a year for 30 days: 141,781 dong.
• 21,850,000 dong of unpaid interest at up to 10% a year for 30 days: 179,589 dong.

About 321,000 dong in all. Expensive for a month, but not ruinous. The real cost of a late payment is not the charge but the record: a debt ten days or more overdue moves out of the top group at the national credit bureau, which every bank checks before lending, as explained in your credit record at the CIC.

How to check a statement in two minutes

1. Find the balance outstanding during the period and the number of days from the previous due date to this one.
2. Multiply the balance by the annual rate, then by the days, then divide by 365.
3. If the result is within a few hundred dong of the statement, the bank is applying the rule. If it is consistently higher by about 1.4%, ask whether a 360-day year is being used, which has not been permitted since 2018.
4. If the gap is larger and appears from a particular month, check whether the rate has been reset. On a floating loan, that is the more likely explanation, and the one covered in base rate plus margin.