# Thread: How to charge interest?

1. ## How to charge interest?

Does anyone know how to work out the charging of interest. If someone owes you lets say R120 000.00, since 2005. How would you work out the interest? I know its something like 0.365 x the amount outstanding, but can't remember.

2. If it is simple interest - ie. interest is charged on the capital only, the calculation is pretty simple.

Daily calculation.
Capital amount x no. of days x annual interest rate / 365 = interest due

Monthly calculation.
Capital amount x no. of months x annual interest rate / 12 = interest due

For compound interest it all gets far more complicated.

3. Thanks for that..

4. No problem - just glad you didn't ask for the formulas for compound interest.

5. Please can you give the formulas for compound interest calculations Dave :-)

6. From an accounting view point Dave is 100% correct from a legal perspective, there are 2 issues to consider:

1. Does the agreement falls with the NCA;
2. Does the original agreement cover the issue of interest.

If the agreement falls within the NCA, the interest is determined by the amount that the agreement states, provided that such interest complies with the NCA provisions on interest.

If the agreement falls outside the NCA, then the provisions of the agreement on interest apply provided they comply with common law in duplum (interest can never exceed capital).

If the agreement falls outside the NCA and is silent on interest, then the provisions of the Prescribed Rate of Interest Act apply and you can make formal demand for payment within a prescribed period, failing which you can then charge mora (over due) interest at the prescribed rate, which is currently 15.5% per annum (straight line, not compounded).

7. If the agreement is silent on interest, then the provisions of the Prescribed Rate of Interest Act apply and you can make formal demand for payment within a prescribed period, failing which you can then charge mora (over due) interest at the prescribed rate, which is currently 15.5% per annum (straight line, not compounded).

I think this one applies. So lets say the amount outstanding is R120 000.00 Do i take that amount and times it with 15.5%, that equels R18600.00, must i still divide that with 12 months. Or do i charge the full R18600.00 for the year x the number of years to be charged?
Thanks for the help

8. Unfortunately Ruth, if you have not previously made demand for payment of the capital by a specified date, stating that failing which interest will be charged, then you will have to do that now and you can only charge interest from the date specified in your demand.

9. Ruth, perhaps give us more detail on the nature of the debt, why its still outstanding and why you want to charge interest.

That will eliminate all the "but if" scenarios.

10. ## Scenario

It is for rehabilitation maintenance owed to me by my ex husband. There is a divorce contract. That states that he has a two year period to pay me a certain amount of money. That was from 2005-2007. There is still an amount outstanding, and want to know if I can charge him interest.

Something else related, is a vehicle. That is mentioned in the contract by make and reg number. This vehicle was repo'd by the bank, as he wasn't paying it. As far as I know, this has now been auctioned off. So I have no way of getting that car back. What do I do now? If i go to the courts, they say open up a case at the police, the police say, they can't issue open up a case or issue a warrant, as the car is no longer with him. So now what?

Thanks

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