InterestDue

Methodology

Every figure InterestDue produces is a computation from the dates and amounts you enter, applied under a published statute that is cited next to the figure. Here is exactly how the computation works.

Day-count convention

  • Monthly statutory rates annualize by ×12 (1.5% per month = 18% per year).
  • The daily rate is the annual rate ÷ 365; interest is simple, on the outstanding principal.
  • Days are counted inclusively from the interest-start date through the as-of date (calendar days).
  • A partial payment is applied to accrued interest first, then to principal (the United States Rule — see below).
  • Segment interest is carried unrounded and the total is rounded to the cent once, at the end.

Worked example: a $50,000 balance held 167 days at the Texas statutory 1.5%/month accrues $4,117.81. We check this exact figure automatically before every update.

Partial payments: interest first (the United States Rule)

When a payment lands on a balance that has already accrued statutory interest, InterestDue applies it to the accrued interest first and the remainder to principal — the common-law United States Rule (Story v. Livingston, 38 U.S. 359 (1839)). Interest is never compounded: it accrues on the outstanding principal only, never on unpaid interest. If a payment is smaller than the interest then due, the whole payment goes to interest, principal is untouched, and interest keeps accruing on the undiminished principal.

The prompt-pay statutes are silent on how a partial payment is split, so the rule comes from general payment-application law, which points the same way in every state we cover:

  • Texas — the United States Rule fills Prop. Code ch. 28’s silence; a contract term may override the order of application.
  • California — Civ. Code §1479 applies interest first when neither party directs otherwise; for an entered money judgment, Code Civ. Proc. §695.220 makes interest-first mandatory.
  • Georgia — O.C.G.A. §7-4-17 mandates interest-first and is not overridable (Threatt v. Forsyth County, 262 Ga. App. 186 (2003)).

Rules are versioned by contract date

Statutes change, and the change usually applies only to contracts entered on or after a date (California’s SB 61 retention cap, effective for contracts dated on or after January 1, 2026, is the clearest example). Each encoded rule carries an effective window keyed to your contract date, so the computation uses the rule that actually governed your contract.

We refuse rather than estimate

If a jurisdiction or a time period is not encoded and test-covered, InterestDue declines to compute. It never extrapolates one state’s rule onto another. See the rule-change log for what is encoded today and how each rule was verified.

This number looks wrong

A wrong figure in a demand letter is our worst failure mode. If a computed figure looks off, tell us the inputs and what you expected at support@interestdue.com. If a rule is wrong, we freeze letter generation for that rule and publish a dated correction in the rule-change log.