How Do Smart Contracts Automate Interest Rate Calculation and Payment Schedules?

The smart contract code contains the logic for calculating the interest rate, often algorithmically based on the liquidity pool's utilization rate. It automatically accrues the interest in real-time on the borrower's debt.

The contract enforces the payment schedule by allowing the borrower to repay at any time, but calculating the exact accrued amount due instantly. No manual administrative process is required for tracking or billing.