Posted By: Skbanker
LOAN INTEREST - 05/24/21 06:41 PM
I am sure I will be judged for this question, but does anyone know what the rules are for renewing interest? Can you renew and/or extend interest on loans as long as you keep documentation of them?
Posted By: rlcarey
Re: LOAN INTEREST - 05/24/21 07:53 PM
I believe the term you are looking for is capitalization of interest. Any capitalization of interest would most likely be criticized by your regulators and external accountants if it was being done to hide past due status or it involved some sort of evergreen situation. A small amount of capitalization, such as the interest that has accrued since the last scheduled payment when refinancing a current loan would not raise any eyebrows.
Posted By: Skbanker
Re: LOAN INTEREST - 05/24/21 09:17 PM
Thank you for the information.
Also, there could be a state law restricting the practice for certain types of credit or borrowers.