How to Calculate the Interest on a Judgment That Has Past Payments

If you have a judgment, there is a method that allows you to calculate the interest when payments have been made in the past. To find the interest, you need the terms and conditions of the judgment, including the amount owed and the interest rate. The smaller the balance, the less interest that accrues on a daily basis. The higher the interest rate, the more you pay in finance charges. As soon as a payment is made, interest starts accumulating once again.

Instructions

1

Get the balance and interest rate on the judgment. If you have a judgment in the amount of $5,000 with an interest rate of 10 percent, you can calculate the interest. Any payments made in the past will cover any previous interest that has accrued assuming the payments were large enough. Make sure the balance you are using has been reduced by any payments.

2

Calculate the interest owed. Take the interest rate, divide it by 360 and multiply the result by the number of days since the last payment was made. This figure should be multiplied by the balance to get the interest for the judgment. If your last payment was January 1, and you are making another payment on January 30 there will be 29 days of interest that has accrued. Divide 0.1 (corresponding to the 10 percent example from Step 1) by 360, and the the result is .0002777. Multiply that by 29 (days) and then by $5,000 (balance). Your interest on the judgment for 29 days will be $40.26, or $1.38 per day. If your payments are $100 per month your new balance will be $4,940.26, ($100 - $40.26 = $59.74), which is a reduction of $59.74.

3

Recalculate the interest after the payment. When you get ready to calculate the interest again, you will start with a balance of $4,940.26. The number of days you will use for the calculation will depend on when the next payment will be made and when the last payment was received. In this example the last payment was made on January 29. Interest has been paid through the last payment date or through January 29. Assume the next payment will be made on the judgment on February 20. Take 0.1 (10 percent) and divide by 360, then multiply by 20 (days), and $4,940.26 (balance). The result equals interest of $27.43. Notice the interest is less than the previous interest figure of $40.26 because the number of days is less, (20 versus 29), and the balance is less. If the same amount of days were used, the interest figure would have been $39.74. You can also use a judgment calculator to get the same results. This is a useful tool for calculating the interest on a judgment as well as a payoff.