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Can you legally be charged interest on money that you borrow but have not received...

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pistollu | eNotes Newbie

Posted February 17, 2009 at 6:59 AM via web

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Can you legally be charged interest on money that you borrow but have not received yet?

Say you go in to borrow 15,000.00 on a Friday afternoon. The funds don't show up in your account until Tuesday since there was also a bank holiday. Should you be charged 3 days interest for days you really didn't have the funds in your possession?

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dano7744 | College Teacher | (Level 2) Educator

Posted August 11, 2010 at 4:35 AM (Answer #1)

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If you borrowed the funds on a Friday afternoon, as you stated, why didn't you receive the funds then and there? When you borrow money from a bank or any other institution for that matter, you enter into a contractual agreement. The agreement is not finalized until you sign the loan documents. When you sign the documents you should have received a check at that very moment. I am hoping that your question is a hypothetical one.

Interest on a bank note is started when the loan documents are finalized. The specific terms of the deal including the calculation of interest are contained in the contract. If you did not receive the funds, the contract was not completed and as such,  they can not charge you for interest for those three days.

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prospero | College Teacher | (Level 2) Adjunct Educator

Posted August 11, 2010 at 6:52 AM (Answer #2)

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Interest rules should be set forth in the loan contract (sometimes called the "promissory note" or simply the "note").  The answer to a question like this is usually answered by looking at the contract, or perhaps at a relevant state statute.

That said:  If in fact the lender became dispossessed of the money on Friday, meaning the lender does not have access to the use of the funds, then the lender may have a right to start charging interest at that point, regardless of whether the funds are not yet available to the borrower.

Bear in mind that 3 days interest on $15,000.00 is not a large sum of money.  If the interest rate was 12% per annum (per year), then 3 days interest would be just under $15.00.

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