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Late Payment Interest
by Andy Zavoina
BIO AND CONTACT INFO
QUESTION: I have a question about late payment interest (not a late fee). Example: grace period 10 days payment due 01-01-01 payment paid 01-12-01 Would most lenders charge the regular interest due on the payment plus 11 days of extra "late" interest at the current interest rate of the loan? If they have a fee, say a set percentage of the loan payment, would most lender still charge the extra "late" interest too?
ANSWER: When you say "extra late interest", in my state (Texas) this simply means the interest rate stated based on the actual and not the scheduled balance.
Some of these variables are influenced by state laws. You may be precluded from charging a late fee (say 5% of the P&I payment due) plus interest on the actual balance. The interest per diem may have to be reduced based on the scheduled balance if you impose another fee.
First published on BankersOnline.com 11/5/01
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