A default interest rate clause stipulates the interest rate that will be applied to overdue payments in a contract. This rate serves as a financial penalty, incentivizing timely payments and compensating the party owed for any delay.
Default interest rate (remarks: fill in accordance with the loan currency and interest rate) RMB loan default interest rate, × Default interest rate of loan with fixed interest rate
The default interest rate of the overdue loan is the benchmark default interest rate determined in option C of the clause plus __ /___%, and the default interest rate of the misappropriated loan shall be the benchmark default interest rate plus __ /___%.
The default interest rate of the overdue loan shall be benchmark default interest rate determined in option C of the Article plus 40 %, and the default interest rate of misappropriated loan shall be benchmark default interest rate determined in option C of the Article plus 70 %.
The benchmark default interest rate within the first floating period is the actually executed loan interest rate in the period of overdue or misappropriated loan. The benchmark default interest rate of the next floating period after expiry of the floating period shall be re-priced specified in Clause 1 of the Article.
Default Interest Rate. The “Default Interest Rate” shall be a per annum rate equal to the Stated Interest Rate plus three percentage points. The principal balance outstanding hereunder from time to time shall bear interest at the Default Interest Rate from the date of the occurrence of an Event of Default (as hereinafter defined) hereunder until the earlier of: (a) the date on which the principal balance outstanding hereunder, together with all accrued interest and other amounts payable hereunder, are paid in full; or (b) the date on which such Event of Default is timely cured in a manner satisfactory to Lender.
An event of default under the Montage Agreement would cause the default interest rate of 17.75% to apply as set forth in the Montage Agreement and Montage would be permitted to elect to accelerate payment of amounts due under the Montage Agreement and exercise all of its rights as a secured party under the Montage Agreement with respect to Collateral (as such term is defined in the Montage Agreement).
II. Default interest rate (I) If Party A fails to use the proceeds of the loan for the purpose agreed hereunder, default interest will accrue on such misappropriated amount at a default interest rate equal to [***]% of the loan interest rate. If the loan interest rate is adjusted according to Article 4.I.(II) above, the default interest rate shall be adjusted according to such adjusted loan interest rate and the mark-up set out above.
If Party A fails to repay the loan hereunder when due, default interest will accrue on such overdue amount at a default interest rate equal to [***]% of the loan interest rate. If the loan interest rate is adjusted according to Article 4.I.(II) above, the default interest rate shall be adjusted according to such adjusted loan interest rate and the mark-up set out above.
If the overdue default interest and the misappropriation default interest are applicable to the loan at the same time, the default interest and compound interest shall accrue at the higher of the overdue default interest rate and the misappropriation default interest rate.
A default interest rate is a financial term that refers to the higher interest rate imposed on a borrower who has not complied with the primary terms of a loan or credit agreement, typically by failing to make scheduled payments on time. This elevated rate serves as a penalty to encourage timely payments and compensate the lender for the increased risk associated with the borrower’s delinquency.
Default interest rates are generally used in financial agreements to address scenarios where a borrower may fail to meet their obligations. You should consider including a default interest rate clause in contracts when:
When drafting a default interest rate clause, it is essential to be clear and precise in your language. An effective clause should include:
Example:
“In the event of a payment default by the Borrower, an interest rate of 5% per annum above the prevailing base rate shall be applied to the outstanding balance. The default interest shall be calculated daily from the date of default until payment in full is made.”
Default interest rate clauses are often found in several types of agreements, including:
By including clear default interest rate provisions in contracts, parties can better manage the risks associated with non-compliance and ensure clearer financial obligations.
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