Calculating Interest on Delinquent Dues

Started by LilW • 1 replies • 3320 views

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LilW (Utah)
Posts: 6

Posted:

Our CC&R's allow us to charge a $25.00 late fee each month that the dues payment is not received, plus 12% APR interest. We have only been charging the late fee but want to begin adding interest too. Our dues are $100.00 each month. How would we calculate the 12% interest if its a yearly interest rate? It wouldn't be as simple as the monthly balance times 12%, would it, because that would not equal out to an annual rate?

RogerB (Colorado)
Posts: 5,067

Posted:

Lil, a $25.00/month charge is already high so why you want to increase it? If you are doing it because there are too many delinquent accounts I suggest setting up more effective collection policies and procedures.

To answer your question, since the balance will change every month it is best to use a monthly interest rate rather than a yearly rate. For example, a rate of 1% per month is slightly higher than an APR of 12%.

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