n Without Prejudice - Accurate calculations : financial law

Volume 15, Issue 4
  • ISSN : 1681-178X



It is customary for a creditor to levy interest on amounts due by a debtor. At common law, interest is calculated only on the unrepaid principal and not on any interest which is payable in terms of the loan ( 1968 3 SA 541 (R)). This is commonly referred to as "simple interest". However, there may be circumstances where a party is directed to pay compound interest, as opposed to simple interest, on the relevant amount. Where compound interest is provided for, the interest will be calculated for the agreed period of time, for example a month, quarter or a year, and will then be added to the capital so that the interest for the succeeding period will be calculated on the combined sum (LAWSA, Second Edition, Volume 15 (2), p185).

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