What Is Compound Interest?
Interest calculated on both the original principal and any accumulated unpaid interest.
Detailed Explanation
In late payment contexts, compound interest causes overdue balances to grow faster than simple interest. Legality and caps vary by jurisdiction.
Example
A contract specifies 1.5% monthly compound interest on invoices more than thirty days overdue.
Why It Matters
Understanding compound interest provisions protects against unexpectedly large late payment costs.
Related Resources
Related Payment Terms Terms
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