Default charges by the society including interest upon interest

[joy gajbhiv]

I want to know are the rate of interest ie 21% charged on default amount or the bill amount
I means if my default is 5000
The rate of interest is 5000×21%÷12 = 87.5 is the rate of interest charged on 5000
But the society is charging me on 5000+87.5 ×21%÷12 = 89.0
In the next month
They are charging me interest upon interest and saying it’s your default amount
Please guide

[Dr. Ashok Dhamija]

Generally, such interest is supposed to be on the default amount itself, and not on the interest component also, i.e., it is supposed to be simple interest and not compound interest. However, you may also have to check the relevant rules / byelaws of your society, as to what are its provisions. You can request the society to inform you under which byelaws it is charging interest on interest, or compound interest.

     

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Dr. Ashok Dhamija is a New Delhi based Supreme Court Advocate and author of law books. Read more about him by clicking here. List of his Forum Replies. List of his other articles. List of his Quora Answers. List of his YouTube Videos.

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