Interest due refers to the amount of accrued interest that must be paid at a given time. Interest is distinct from principal and is assessed on loans. Interest can accrue on a daily, weekly, monthly or quarterly basis and can come due at different intervals depending on the terms of the loan.
When a person borrows money, the amount of money he borrows is referred to as the principal. The individual that is borrowing the money is charged interest, or a fee, for the privilege of doing so. The interest is normally represented as percentage.
The percentage, called the interest rate, varies depending on the type of the loan. Interest rates tend to be lower for secured loans, such as mortgages, in which rates can be around 5 percent. On the other hand, rates are often higher for unsecured loans, such as credit cards, in which rates can reach upwards of 20 percent annually.
The terms of the loan document will also spell out how interest is calculated. The interest is then determined by multiplying the principal balance times the interest. If, for example, 5 percent annual interest is charged on a loan but interest accrues monthly, that means that each month .004 percent (5 percent divided by 12) times the balance is charged.
Interest thus accrues throughout the course of the loan and this interest that you accrue becomes part of the balance of interest due. When a person has interest due, that interest must be paid at certain points depending on the nature of the loan. For fixed rate mortgages, the interest over the life of the loan is calculated and added to the principal and this is used to determine how much a homeowner must pay each month to pay off the mortgage in full by the end of the term of the loan.
In other types of loans, interest due is simply added to the principal and monthly payments are determined on the basis of the total amount due. In these cases, payments that a person makes are generally applied first to pay the interest due and then to reduce the principal. If the payments a person makes are not enough to pay the interest, the unpaid interest gets tacked on to the principal and raises the balance due. In these situations, even though a person is making payments on a monthly basis, his loan balance will generally continue to go up instead of going down.
