Late Fees

Late fees are charged when a borrower misses a scheduled repayment. These fees serve as a penalty for delayed payments and are distributed pro-rata to all investors, since the capital at risk belongs to them.

⏱ When Are Late Fees Charged?

1. Annualized Penalty: Late fees are calculated using a yearly interest rate applied to the overdue amount (unpaid principal + unpaid interest).

2. Daily Basis: Fees accrue based on the number of days a payment is delayed, not by seconds or time of day.

3. Per EMI: Each delayed EMI is assessed independently — a late fee is calculated for every missed installment.

4. After Grace Period: A grace period may be defined per loan. Late fees apply only after this period ends.

5. Charged Upfront on Repayment: The late fee amount is collected along with the delayed payment, at the time the borrower clears their dues.

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📘 How Late Fees Are Calculated

🔢 Key Terms

• late_fee_apr – The annualized late fee interest rate. Example: 4% late fee per year → 0.04

• unpaid_amount – The portion of the installment that was not paid on time (Principal + Interest).

• days_late_by – Number of days past due, excluding any grace period.

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✅ Formula

late_fee = unpaid_amount × (late_fee_apr / 365) × days_late_by

This gives the penalty amount in currency terms, based on how many days the borrower is overdue.