If A Late Fee Is 10% Per Annum, How Is That Calculated On A Monthly Basis?

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4 Answers

Anonymous Profile
Anonymous answered
What we do at my condo is take 10% (.10) and divide that by 12.. = .007977.
Each month you take whatever is late (we do >90) and tack on .007977.
Each month that small amount is compounded.

EX: 1,250 past due x 0.007977 = 9.98
The next month, if that is still not paid, and the next month's fees are added to the >90,
1250+300=1550.
Add in the interest from last month, 1550+9.98 = 1559.98
Calculate this month's interest on that total.
1559.98 x 0.007977 = 12.45

If you take 0.007977 and multiply it by 12 you will see that equals .10, makes more sense than any of the other answers.
Anonymous Profile
Anonymous answered
Fh_Safqat is correct here.  The per annum charge is not based on outstanding amounts owed.  If association fees are equally shared then the second method may work but is not correct.  Usually association fees are based on a pro rata share anyway in which case the second method is definately incorrect.  This rate is set by your monthly charge x 12 or your, you guessed it, per annum rent.

Unless bylaws or a lease state that you can compound interest which I highly doubt, then it is illegal to charge it.  If you are calculating these amounts wrong then you have made yourself and your community liable for suit.

If you are in the business of collecting rent or collecting fees, like myself, you should not be in the business in collecting late fees.  It's always easier to have a flat fee.  People tend to abuse the lower rate and send in their money a week late.
Anonymous Profile
Anonymous answered
Total fee per month = $140
Total fee per annum =140*12=$1680
If the late fee charge per annum is 10% then we will apply this percentage on per annum fee =1680*10/100=$168
per month late fee charge percentage = 10/12=0.83 % per month
per month late fee charges=140*0.83/100=$1.162
now for 2 months the total amount =1.162+1.162=&2.324
owner now ows total amount which is equal to =140+140=280+2.324=$282.32
So the owner ows $282.32 not $312.40
thanked the writer.
Anonymous
Anonymous commented
I'm sorry, but this makes NO sense. You are suggesting that if they can charge 10% per annum, then over the course of two months they are only making $2.32 ($282.32 - ($140 * 2)) in late fees. That is obviously not the case. The actual answer is that at 10% per annum, you can add $14 in late fees each month ($140 * .10). You cannot compound it -- so after month one, even though they now owe $154 ($140 + 14), you can only tack on another $14 to the next $140 they owe -- thus they would owe $308.

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