What is anatocism?

When we ask for a loan we have to be aware of the consequences that can be derived from it. Next, we are going to comment on a concept related to loans.

The so-called anatocism refers to the act of collecting the interests of default interest that have been originated by not having paid a loan. Loans, when requested, ask us to pay monthly installments (or depending on how we have established it) which is, on the one hand, part of the amount to be repaid for the capital borrowed and, on the other, the interests that are generated by a period of time has elapsed.

For this reason, when a person does not pay the installment for a certain period, the amount that has been stopped paying must be added to the capital that has been loaned and will become part of the total that must be paid. The new interest will have to be calculated from this new total.

To regulate this, the Spanish Civil Code states in its article 1109 that lPast due interests accrue legal interest from the time they are judicially claimed, even if the obligation has remained silent on this point. However, the Commercial Code (Art. 317) indicates that the collection of interest on interest is prohibited.

Even if this is the case, if the parties have subsequently decided that these interests can be capitalize (become part of the total), it must have been made known in the contract that it was signed in relation to the loan.

It is also important that we distinguish between interests derived from loan in itself, of the delinquent interests that are subsequently agreed (and under contract) when all or part of the obligation to pay interest and the return of the total loan is breached.

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