Determine the size of the line of credit, which will, in turn, determine the monthly repayments based on factors like outstanding balance at a trigger date and the agreed interest rate. Most lenders will use an average daily balance method, which takes an average over the given billing period, and then charges a proportion of the annual interest rate based on the actual number of days in that period. Typically, this will be the number of days in that month.
To figure out how much you are likely to pay, you will need to know the periodic rate, which is the percentage of interest for the billing period. Look at the annual rate, divide by 365 and multiply by however many days in the billing period.
Next, determine how many days are left in the period when you make a purchase from your line of credit. Multiply the value of the purchase by the number of days left in that period, and do the same for other purchased items. Add these calculations to give you your average daily balance for new purchases. Then, add this figure to any initial balance you already have in place, giving you the average daily balance for interest calculation purposes.
