The interest bills are commonly computed by one set of men and checked by another set, and are then entered in the interest book. The use of interest tables is discouraged in many of the larger banks, as figuring by head and hand, using, say, the old United States bank rate system, together with the 6 per cent method, has proved more speedy and accurate than the use of tables. To illustrate: the principle that the interest for 6 days at 6 per cent on $100,00o equals $too (answer arrived at by point ing off three places to the left) can be varied to almost any require ment, where only one rate has been made during the life of the loan. But where a loan has run, say, for a month with several changes in rates during that time, the easiest rule to follow in such cases is to 1. Multiply the number of days by the different rates.
2. Multiply the sum of these amounts by the multiple or fraction of $1,000 which the principal is (this can usually be done merely by pointing off to right or left).
3. Divide by 6 twice; thus the interest for a loan of $100,000, running for a month, at the following rates, would be computed: The custom is to figure on a 31-day month and a 36o-day year basis, so that the bank gets 31/36o of a year's interest on a month's loan, instead of 31/365, netting it a slight profit on all loans where interest is charged for the actual number of days elapsed.
The interest on time loans, not discounted loans, is figured at 3o days to the month.
In addition to the collection of interest on its own loans, the loan department is also responsible for the collection of interest on loans held for out-of-town banks. These loans are included with its own loans on the interest bills sent out, and, when paid, the interest is apportioned among the different banks to which it is due. The correspondent usually gets the same rate as the bank itself, and the loan is given the same care as to margin, collateral, and rates as its own, and the whole service is gratuitous.