Is interest computed differently on revolving credit vs non revolving credit?

Answer 1

Yes. Interest accrual methods will depend heavily on the specific loan type. Different revolving accounts may be calculated differently, as will different fixed loan types.

Most commonly, a non-revolving loan may be "simple interest" where interest is calculated daily based on the principle loan balance, or may be "amortized" where a set amount of interest is charged each month based on calculations made when the loan was granted. Lenders may also use a slightly different calculations due to the days-in-year their system charges interest on (365/360 etc).

A revolving credit account interest rate may be compounded (commonly used for credit cards) where you pay interest in the total account balance daily (so you effectively pay interest daily on interest you accrued the day before), simple interest (interest charged daily on the principal loan balance), or one of several other more obscure interest calculation methods.

There are some loan types, both fixed and variable that require payments less than the amount required to satisfy interest due. These "negative amortization" loans charge interest on unpaid principal and interest while adding the unpaid interest to the loan balance. These loans became notorious as a major factor in the mortgage and housing market collapse that became widespread in 2007.