Interest on arrears calculator
Interest on arrears is an essential mechanism in our legal and financial system. It is used to compensate a creditor for the loss suffered when a debtor is late in paying his or her debt. Let’s take a look at the essential aspects of this mechanism.
When can I ask for them?
Interest on arrears can be claimed in a variety of situations. The most common case is late payment of a bill, but it also applies to contractual debts, court judgments, bank loans and unpaid rent. For condominiums, they are often applied to unpaid service charges.
Types of interest on arrears
1. Interest at the statutory rate
The legal rate is the default option in the absence of a specific agreement. It is set by the Banque de France every six months, with an important distinction between private and professional customers. This rate is used as a reference for many transactions.
2. Interest at the legal rate plus
In certain situations, particularly commercial ones, the legal rate may be increased by a multiplier. For example, a contract may stipulate that interest will be calculated at three times the legal rate, thus increasing the pressure on the debtor.
3. Interest at contractual rate
The parties may agree on a specific rate in their contract. This rate must be clearly stated and may not exceed the legal usury rate. It must be agreed in writing to be valid.
4. The benefits of a court decision
When a judgment is handed down, interest is subject to special rules. If the debtor fails to pay within two months of the enforceable decision, the rate is automatically increased by 5 points.
How do I claim them?
There are two main ways to claim interest:
For amicable settlements, we recommend sending a formal notice by registered mail. You can also include a clause in your contracts or mention interest on your invoices.
By legal means, you must include your request for interest in the writ of summons, specifying the desired rate. The judge can then rule on your request.
Interest calculation
Interest is calculated according to a precise mathematical formula:
Interest = (Principal × Rate × Number of days) / (100 × 365)
It’s important to note that this calculation is carried out day by day, until payment is made in full. In some cases, interest may even accrue after one year (anatocism).
Protections and limits
The system includes several safeguards. The usury rate may not be exceeded, and the debtor must be clearly informed. In certain cases, the judge may grant deferred payment. In most cases, a formal notice of default is required before interest starts to accrue.
Practical tips
If you are a creditor, remember to :
- Include an interest clause in your contracts
- Keep a written record of all your reminders
- Sending formal notices
- Keep all documents in a safe place
If you owe money, you can :
- Propose a payment schedule
- Apply for a rebate
- Check that the rate applied is legal
- Challenge calculations if necessary
Points to watch
Pay particular attention to the interest start date, the justification of the rate applied, and compliance with legal formalities. Proof of formal notice is crucial, as is the accuracy of calculations.
In commercial matters, the rules are stricter, with automatic penalties and a €40 flat-rate indemnity for collection costs. Private individuals, on the other hand, benefit from enhanced protection, with more controlled rates.
This may seem a complex subject, but it is essential to protect the rights of creditors while ensuring fair treatment of debtors. In complex situations, don’t hesitate to consult a legal professional who will be able to guide you according to your particular case.