Accrued interest is interest that has built up on borrowing over a period of time but has not yet been paid. As soon as you draw funds, interest typically begins to accrue on the outstanding balance, day by day, until it is charged or paid.
How it builds up
Interest accrues on what you actually owe at any given time. The longer a balance is outstanding, and the larger it is, the more interest accrues. This is why repaying sooner, where your agreement allows, can reduce the total interest you accrue.
- Accrued interest reflects time and balance, not a one-off event.
- It usually appears on your statement so you can see how it builds.
- Reducing the balance reduces what accrues going forward.
Why it is useful to understand
Knowing how interest accrues helps you read your statement and plan repayments. If you are considering an early or extra repayment, asking for a settlement position tells you exactly how much has accrued at that point.
Credicorp lends only to UK limited companies and LLPs for business purposes. The way interest accrues on your Credicorp Flex or Credicorp Slice facility is set out in your agreement, and the figures specific to your account are shown there and on your statement. Ask our team if anything is unclear.
See also: Understanding the breakdown between capital and interest in your balance, What is equity in a business?, What is amortisation?.