How do you calculate interest on a judgement?

We recently won a consent judgement on a substantial amount. The court ordered the Plantiff to pay the principal amount and the court fees at 7.5% per annum.

The terms of the payment was to be a lump sum within 1 week of the judgement, with subsequent payments on the 1st and 15th of every month until paid in full.

Do I apply the 7.5% interest to the princiapal amount for the begining balance, add interest at .625 (7.5 divided by 12 months) per month, or something else all together?

Nevermind - I called the courts and asked. For future reference - the interest (7.5%) is added to the unpaid balance each month.

You are dividing 7.5 by 12 months when you are adding it to the unpaid balance right every month right? You are compounding the interest monthly. If you don’t you will be charging something like 90% per annum.

For example, if you are owed $100 and zero is paid the first month you take 100 times (7.5/12) and add it back to the 100.
100+(1007.5%/12) = 100 + (100.075/12) = 100 + (100*.00625) = 100+ .625 = 100.625

Next month same thing:
100.625+(100.6257.5%/12) = 100.625 + (100.625.075/12) = 100.625 + (100.625*.00625) = 100.625+ .629 = 101.254

Credit cards work the same way if it compounds monthly.

d’oh, silly me. I see in the last line of your original post you know how interest works. Nevermind! :smack:

Boy, between my typos and all the “neverminds”, this is one messed up thread.
Thanks for the help, though, jsmith! :slight_smile:

BTW, judgment is spelled, um, judgment.


One other note.

Interest doesn’t compound. Your Credit Card does not compound the interest you owe. At least it shouldn’t. I believe charging interest on interest is illegal.

Each month you calculate the monthly interest rate times the principal due, not the total amount due.

$100 owed 12% APR.
At the end of the first month, $100 in principal is owed, $1 in interest.
Nothing is paid.
At the end of the second month, $100 in principal is owed, $2 in interest.
$10 is paid.
At the end of the third month, $92 in principal is owed, $0.92 in interest (1% of $92).

Credit cards take interest, penalties and other fees first, then whatever is leftover goes to principal. I don’t see why you can’t do this as well.

That’s not how it works. Each month the interest is calculated on the outstanding balance. It doesn’t matter how much of that outstanding balance was the original principal and how much has been added in interest or fees.

Of course, if you’re paying something off monthly, you always pay off all the interest and some of the principal, so the distinction doesn’t matter.