How is late payment interest calculated?

How is late payment interest calculated?

How to calculate interest on mortgage loan arrears

When we decide to take a leap into the void and become our own bosses, either by creating a company, or by registering as self-employed, there are many situations that we will have to face and that will not be pleasant for us.

It is clear that there are many advantages, such as being your own boss, organize your hours, especially do it according to your private life (if you have children, being able to pick them up at school, or be with them if they get sick and if you do not have them to enjoy more of your free time as you please), create your own lifestyle …

In this post we are going to give you the keys to get not only to get paid, but also to get the late payment interest for the delay in the payment of the debt. You will also learn how to calculate late payment interest. This post will also help you if you are a private individual who is in a situation of late payment in different areas such as rent, payroll, etc.

As we have seen in the previous post on interest for late payment in the law against delinquency, there are many doubts about when it is possible, how to calculate interest for late payment and how to collect it, when to start calculating interest for late payment, what is the amount that must be paid by a person who has not fulfilled his agreement, how to calculate interest for late payment, for how long, and if it does not matter the type of debt in question and whether the debtor is a company or a consumer.

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How to calculate interest on late payment of a debt

Sometimes it is very difficult to collect a certain payment. In fact, there are many clients who are late with their payments. But, far from not being regulated, our Law provides a series of mechanisms that will help us to collect our clients’ debts. It is in these situations of non-payment where late payment interest becomes especially relevant. In the following

Default interest, also called late payment interest, is a kind of compensation paid by the debtor to the creditor for non-payment of the debt. Thus, the delay with the payment of a debt always has consequences, and they are these additional interests.

Since this is a commercial operation, the interest starts to accrue automatically, so we would be looking at a 30-day default period. Applying the formula, it would be as follows:

Thus, only when these conditions are met can we claim late payment interest. However, the creditor may claim interest for late payment from the debtor, which will consist of all the costs incurred by the debtor’s default. In any case, the compensation may not exceed 15% of the debt when the amount of the debt exceeds 30,000 euros. When the amount of the debt is less than 30,000 euros, the compensation may not exceed the amount of the debt.

Interest on late payment of taxes

To understand it clearly and at once, let’s say that the interest rate in Chile corresponds to an amount of money that regularly refers to a percentage of the operation that is being carried out.

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This data is of utmost importance for any person who belongs to the business world or who wants to get into it, since it corresponds to a very important information for the financing of a venture.

If we refer to a deposit, the interest rate will mean the payment received by the person or company that deposits the money, precisely for delivering the agreed amount at the disposal of the other. On the other hand, if we are talking about a loan, the interest rate will be the amount that the debtor will have to pay to the lender for having used the money.

In Chile, for example, it has been stipulated that in the case of loans there is a maximum conventional interest rate, which refers to the maximum level that an interest rate can reach. For this purpose, the Superintendency of Banks and Financial Institutions is in charge of setting such amount, and any violation of such limit will be sanctioned by law.

How to calculate the interest on late payment of a loan

On many occasions, and unfortunately even more so with the economic crisis, many people and companies are unable to pay their outstanding debts or bills. Sooner or later, this overdue amount must be paid, and for the time that has been exceeded, an extra cost, called late interest, must be paid. In this unComo article we explain how to calculate the interest for late payment.

Let’s put the above formula with a numerical example, to help us understand more easily how it works. Let’s imagine that the amount owed is 1.000€, the time is 120 days and the default interest is the standard one, a 5%.In this case: 1000 x (120/365) x 0,05= 16,43€ would be the default interest that the debtor should face, apart from the amount and the usual interest.

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In addition, in the event that the debt is covered by the Late Payment Law, we can demand from the debtor all those costs related to the procedures to make effective the collection of the debt, such as telephone calls, letters or advice.