How Is Interest Calculated on a Judgment?

A judgment is the outcome of a lawsuit when you are sued for a debt that you owe and the judge decides in favor of the lender. On top of the remaining balance of the loan that is delinquent, you will also have to pay interest on the judgment amount. Every day that the judgment remains unpaid, more interest accumulates.

Interest Rate

The amount of interest that can be applied to a judgment depends on the laws in that state. For example, Indiana allows an 8 percent annual interest rate while Alabama levies a 12 percent annual interest rate on judgments. Florida allows up to an 18 percent annual interest rate if such a rate was agreed upon in the original written contract for the loan.

Daily Interest Amount

To calculate the daily interest on a judgment amount, you first need to multiply the judgment amount by the annual interest rate. For example, a $15,000 judgment with a 12 percent annual interest rate would accrue $1,800 per year in interest ($15,000 x 0.12 = $1,800). Divide the annual interest by 365 days. This will tell you how much interest accumulates on the judgment each day. For example, a $15,000 judgment with a 12 percent annual interest rate would accrue $4.93 per day in interest ($15,000 x 0.12 = $1,800/365 = $4.93 rounded).

Accrued Interest

Interest usually starts accumulating from the day that a final judgment is entered into court records. Count how many days have passed since the final judgment was entered and multiply that number by the daily interest amount. For example, a $15,000 judgment with a 12 percent interest rate that was entered 90 days ago will have accrued $443.70 in interest ($15,000 x 0.12 = $1,800/365 = $4.93 x 90 = $443.70).

Deducting Payments

The daily interest amount will change each time a payment is made against the judgment balance. The accrued interest is deducted from the payment first, and the remainder of the payment is applied to the judgment balance. For example, if a payment of $5,000 was made on the $15,000 judgment above, the $443.70 in accumulated interest would be deducted from the payment first; then the rest would be deducted from the $15,000 original balance. So, the new daily interest amount would be $3.43 ($5,000 - $443.70 = $4,556.30; $1,5000 - $4,556.30 = $10,443.70 x 0.12 = $1,253.24/365 = $3.43 rounded).