What is legal interest?
Verified 01 July 2023 - Legal and Administrative Information Directorate (Prime Minister)
The legal interest is a sum of money that the debtor shall creditor in case of late payment.
The statutory interest rate changes every six months:
It is used to calculate the following:
- Interest on sums payable in the event of late payment ordered by a court decision
- Interest on a loan, if the contract does not provide for overall effective rate (TEG) of this loan
legal interest should not be confused with the contractual interest nor with the indexing clause, which are distinct from the legal interest.
Simple legal interests
Interest due by the debtor shall be called simple interests where they are calculated solely on capital. This is the case when the amounts have been due for less than a year.
Date of judgment: 1er september 2020
Decision: Order to pay €2,000
Time limit for application of the decision: day of the decision
Legal interest rate on 1er September 2020: 3.11% (creditor is an individual)
If the convicted person commits to pay on September 30, 2020, you get:
(2,000 x 30 x 3.11) / 36,500 = €5.11
2,000 + 5.11 = €2,005.11
Total to be paid is €2,005.11.
Remember: even if 2020 is a leap year, 36 500 should be used in the calculation.
Legal interest plus
Where the amount due is not paid within 2 months of the date of application of the judgment, simple statutory interest shall be paid over the period of the first 2 months. And increased interest are to be paid after these two months.
Date of judgment: 1er September 2015, served on 17 September 2015 and becoming applicable that same day.
Decision: Order to pay €2,000
The period for the payment of simple statutory interest (first 2 months of delay) ends on 17 November 2015. Legal interest plus interest is payable from 18 November 2015.
Sentenced person agrees to pay on April 10, 2016
Simple statutory interest rate of 2d 2015 semester: 4.29% (creditor is an individual)
Statutory interest rate plus 2d 2015 semester: 9.29%
Statutory interest rate plus 1er 2016 semester: 9.54%
The amount of statutory interest due for each period must be calculated and added as follows:
- Amount of simple statutory interest from 17 September to 17 November 2015:
(€2,000 x 61 x 4.29) / 36,500 = €14.34
- Amount of statutory interest plus from 18 November to 31 December 2015:
(€2,000 x 44 x 9.29) / 36,500 = €22.40
- Amount of statutory interest plus for 2016:
(€2,000 x 100 x 9.54) / 36,500 = €52.27
The amount of the statutory interest is: €14.34 + €22.40 + €52.27 = €89.01
The total to be paid is: €2,000 + €89.01 = €2,089.01
Remember: even if 2016 is a leap year, 36,500 must be used in the calculation.
Compound statutory interest
Interest due is capitalized (referred to ascompound interest) where they add to the initial capital to generate interest themselves. This capitalization may be provided for in the contract or decided by the judge. They may only be used for a claim exceeding 1 year.
Using the example above, the amount of the statutory interest due for the year 2015 must be calculated and included in the capital for the year 2016. The calculation to be made is as follows:
- Amount of simple and increased statutory interest due for 2015:
€14.34 + €22.40 = €36.74
- In 2016, the amount due becomes:
€2,000 + €36.74 = €2,036.74
- Amount of interest due for 2016:
(€2,036.74 x 100 x 9.54) / 36,500 = €53.23
The debtor shall repay: €2,036.74 + €53.23 = €2,089.97
Remember: even if 2016 is a leap year, 365 must be used in the calculation.
- Monetary and Financial Code: Articles L313-2 and L313-3Legal interest rate plus statutory interest rate
- Monetary and Financial Code: Article D313-1-ACalculation method
- Civil Code: Articles 1231 to 1231-7Judgment and legal interest: Articles 1231-6 and 1231-7
- Order of 27 June 2023 on the fixing of the statutory interest rate