Default Interest (Late Penalty)
Extra interest or a penalty charged when you pay a debt or bill late.
Default interest is the additional charge a creditor adds when a payment is overdue, on top of the normal interest. It is meant to compensate for late payment and to discourage it, and can accumulate quickly on neglected debts. Statutory rates often apply to unpaid invoices and obligations, while contracts may set their own. Letting bills slip into default not only costs extra but can damage your standing with the creditor. Paying on time, or arranging terms before a due date, avoids it entirely.
Example
A $1,000 invoice paid two months late might accrue default interest of a few percent annualised, plus any fixed late fee set in the contract.
Try in Assetli
Read more
Related terms
Interest Rate
The percentage charged on borrowed money or earned on deposited/invested money, expressed as an annual rate.
APR (Annual Percentage Rate)
The annualized cost of borrowing expressed as a percentage, including interest and mandatory fees, used to compare loan products.
Debt-to-Income Ratio
The percentage of your gross monthly income that goes toward debt payments, used by lenders to assess borrowing capacity.
Revolving Credit
A flexible credit line, like a credit card, that you can repeatedly borrow from and repay up to a set limit.
Explore more terms
Wage Garnishment (Attachment of Earnings)
A legal process where part of your salary is withheld to repay a debt, leaving a protected minimum.
Insolvency (Debt Relief)
A legal process for people who cannot repay their debts, leading to structured repayment or discharge.
Transaction Categorization
The process of classifying financial transactions into categories like groceries, rent, or entertainment to analyze spending patterns.
Recurring Transactions
Transactions that repeat at regular intervals — subscriptions, loan payments, salary deposits — essential for predicting future cash flow.
Bank Synchronization
The automated process of importing transactions from bank accounts into a financial management tool, either through API connections or file imports.
IBAN
International Bank Account Number, a standardized format for identifying bank accounts across borders.