# 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.\
  \&#xNAN;*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.