How are interest charges calculated?
Interest shown on the payoff statement is calculated to its expiration date. A per diem (per day) interest amount will be included, to be added to the payoff statement amount if the payoff is sent after the expiration date. If your loan is paid ahead, the payoff amount will be reduced by any interest not yet due. For example, if the payoff statement expiration date is September 1st and the account is paid through November 1st, the interest paid ahead will be subtracted from the required payoff amount. Upon receipt of the payoff amount, the actual interest charged includes interest up to but not including the date of receipt. Remember that interest is collected in arrears. For example, if the September 1st payment (which includes interest for August) has been made and your loan is paid in full on September 15th, interest will be due for the first fourteen days of September.
How interest is calculated is important and decides how much you’re charged on your unpaid account balances. There are 3 ways to decide what your unpaid account balances are: Average Daily Balance (ADB) Adjusted Balance (AB) Previous Balance (PB) The ADB is each day’s balance added up for the month and divided by the number of days in a billing cycle. This is the most common way to calculate your balance and proves the most costly to you. If you don’t pay your bill in full, the interest is charged from the day a charge is billed to your account.
The interest is calculated in two basic ways. Either the total interest due is calculated up-front, and added to the loan advance, or is calculated on an ongoing basis, either daily or monthly, based on the capital outstanding at that time. Repayments are simply the total of interest and capital divisible. The two methods make no material difference to the amounts paid by you to the loan provider.
Interest charges are calculated monthly and assessed on unpaid premiums after the last day of the month in which the premium is due. Interest charges are calculated using the Treasury Current Value of Funds Rate. (See the SFPCS-P Interest Calculation.) See monthly premiums late and interest charge examples. (pdf)Is interest assessed on a daily basis? No. Interest is assessed on each full month that premium is unpaid. If all outstanding premium is paid on any day of the month, interest will not be assessed for that month (i.e., there will be no interest charge in the next month’s bill). How is payment of interest remitted? You no longer remit a separate interest payment. Include the interest amount in your premium remittance. After interest has been assessed, the amount owed in interest is automatically applied from a payment received after any owed late fees have been applied. (Payments are applied first to any late charges, second to any interest charges, third to premium, and last to
