What happens when a payment is late
A loan that carries an interest rate accrues one month of interest on its outstanding balance for each full month past the due date. The check runs once a day and never charges the same month twice. Because the base includes interest already accrued, arrears compound — which is why a small overdue loan stops looking small surprisingly quickly.
The rule
- A loan is overdue once the current date passes its due date and it is not fully repaid.
- For each full month past that date, one month of interest is accrued on the outstanding balance — principal, plus interest already accrued, minus everything repaid.
- A scheduled job runs this check daily and records each month exactly once. Nothing is charged twice, and nothing is missed because you did not open the app.
- Accrued interest is added to the outstanding balance. The loan is marked paid off only when the whole of it — principal, charges and accrued interest — is settled.
A worked example
$10,000 at 5% a month, due 1 June, unpaid
- 1 July — one full month late. $500.00 accrues (5% of $10,000.00). Outstanding: $10,500.00.
- 1 August — two months late. $525.00 accrues, because the base is now $10,500.00, not the original principal. Outstanding: $11,025.00.
- 1 September — $551.25 accrues. Outstanding: $11,576.25.
Three months late has added $1,576.25, not the $1,500.00 that three flat months would suggest. Compounding is the difference, and it widens every month.
When nothing accrues
Accrual is not a penalty system. It does not fire when:
- The loan has no interest rate. A 0% loan that goes overdue stays exactly the amount it was. It is simply late.
- Less than a full month has passed. Nothing accrues on day three of being late; the first charge lands at one month.
- The loan is settled. Accrual stops the moment every obligation is covered.
There is no separate late fee in LoanCompass, and no fee appears on its own. If you and the borrower agreed on one, add it as a charge with a reason attached so it is visible to both of you as a distinct line rather than buried inside a balance.
Seeing what is late
Overdue money is reported in two places, and both count arrears across the whole ledger rather than the current month: the dashboard's overdue tile, and the repayment forecast, which lists the individual late installments with the borrower and the loan they belong to. A borrower several months behind with nothing due this month still appears in both — a month-scoped view would quietly lose exactly the person you most want to see.
Chasing it
Borrowers who hold an account are emailed three days before each due date automatically, so the first nudge is not from you. After that, the loan page writes the follow-up for you — a text or an email containing the loan, the outstanding balance in its own currency, and a link to the borrower's own view. Nothing sends without you pressing send.
If the loan is not going to be repaid on the original terms, the more useful move is usually to change the terms rather than let arrears compound: extend the term, drop the rate to zero, or record a partial settlement. Editing terms never rewrites the repayments already recorded.
Keep reading
- Repayment plansThe six monthly plans a loan can use, what each one does to the payment size, and how to pick between them.
- Interest rates are monthlyEvery rate in LoanCompass is per month, not per year. What that means for the figure you type in.
- OverpaymentsWhere the extra money goes when someone pays more than the installment, and what it does to the schedule.
- Recording loans and repaymentsAdding a person, writing down a loan you already made, logging repayments, and correcting a mistake.
Stop recalculating this by hand
LoanCompass keeps the schedule, the repayments and the running balance for every loan you have made, so the figures on this page stay current without you rebuilding them. It is free while in early access, and no money moves through it.