How Interest Actually Accrues on a Loan Claim Between Payments
Accrued interest explained
How does interest accrue on a loan? Under a daily accrual method, each eligible day adds an amount based on the principal outstanding that day and the annual rate. Add those amounts over the period and the result is accrued interest. It represents interest that has built up under the loan terms and is still awaiting payment.
The distinction becomes clear when a scheduled payment is late. Interest for the period may already have accrued, while the cash has yet to reach the investor’s account. The payment schedule shows when the borrower is due to pay. The accrual calculation determines how much interest has built up by that date.
An investor holding several claims may see a series of small interest credits rather than one combined payment. Each credit follows the schedule of its own claim. To understand one payment, start with the balance it was calculated on and the dates it covers.
When interest starts accruing on a claim
Does interest start accruing on the day I invest?
The start date depends on the claim’s terms. Under Maclear’s published interest calculation rules, accrual starts when the loan is transferred to the borrower and the project reaches funded status. An investor can commit money before that happens. Counting from the commitment date would then include days before accrual began.
The way a loan counts the first and last days of a period can also affect the result. The day count convention varies by platform and is specified in the claim’s terms. For the first payment, the relevant dates are the contractual accrual start and the end of the first interest period. Later calculations follow the period boundaries set out in the terms.
| Parameter | What it means | Effect on interest for the period |
|---|---|---|
| Annual rate | The nominal annual interest rate specified for the claim. | Sets the rate applied to the outstanding principal for the relevant fraction of a year. |
| Outstanding principal | The unpaid principal balance at the start of the period. | When a principal repayment reduces the balance, less interest accrues on it at the same rate over an equally long period. |
| Day count convention | The rule for converting the days in an interest period into a fraction of a year. | When the convention uses actual days with a fixed denominator, a longer month earns more interest at the same rate and balance. |
| Accrual start date | The date on which interest starts to accrue under the claim’s terms. | Determines which days count towards the first interest payment. Confirm the date with the platform if the terms are unclear. |
Why monthly interest can differ at the same annual rate
Why isn’t monthly interest just the annual rate divided by 12?
Dividing by 12 treats each month as one-twelfth of a year. A day count convention is the rule for turning a particular interest period into a fraction of a year. Under Actual/365 Fixed, the calculation counts the actual days in the period and uses 365 as the denominator. A 31-day period therefore earns more than a 28-day period at the same rate and balance. Other conventions can give different results.
“Why is my monthly interest payment different?” usually comes down to the dates, the balance or both. Compare the number of days in the two periods, then check whether the earlier payment returned any principal. The amount of interest can change while the annual rate stays fixed. That is one reason two offers with the same headline rate can pay different amounts.
The contractual interest rate is the input for calculating interest over a period. Maclear’s main return metric, Annualized Return on Investment (AROI), expresses expected earnings relative to the purchase price on an annual basis. If a claim is bought at a discount, its projected AROI can change even though the contractual rate used for accrual stays the same.
How amortisation changes the interest in later payments
Why do later payments have less interest than the first one?
Amortisation is the gradual repayment of principal. Once a payment returns part of the loan balance, interest starts accruing on the smaller amount. At the same annual rate and for periods of equal length, interest falls as principal is repaid. A longer period can offset some or all of that decline, so the interest component need not fall every month.
The relationship between amortisation and interest paid over time is easier to see when the two parts of a payment are separated. The principal portion returns money that was lent. The interest portion is the charge on the balance for the period. An interest-only payment leaves the balance unchanged. With scheduled payments that return principal before maturity, the amount left to earn interest falls as those repayments are made.
Who receives accrued interest when a claim is sold?
What happens to accrued interest if I sell before the payment date?
On Maclear’s Secondary Market, the seller keeps payments already received and receives the agreed sale proceeds, less any applicable fee. Once the sale completes, the buyer acquires the remaining claim. Under Maclear’s rules for seller and buyer payments, interest accrued before the sale but still unpaid transfers with the claim.
Suppose a sale completes halfway through an interest period. If the borrower makes the next scheduled payment, it goes to the buyer, including any interest from before the sale that was unpaid at completion. The sale proceeds and the borrower’s later payment are separate amounts. The transfer takes effect when the sale completes. Listing the claim alone does not change who receives payments.
A step-by-step example on a €1,000 claim
Illustrative example only. Assume an amortising claim starts with €1,000 outstanding at a 12% annual interest rate. It returns €100 of principal with each monthly payment. The first period lasts 31 days and the second lasts 28 days. The example uses Actual/365 Fixed and assumes each principal repayment is made on schedule at the end of its period.
1. Calculate the first period’s interest. Multiply the annual rate by the fraction of the year covered by the period, then multiply by the outstanding principal. Here, 12% × (31 ÷ 365) × €1,000 ≈ €10.19. With €100 of principal repaid, the first payment totals €110.19.
2. Update the outstanding principal. The €100 principal repayment brings the balance down to €900. The next period starts with that amount outstanding.
3. Calculate the second period’s interest. At the same annual rate, 12% × (28 ÷ 365) × €900 ≈ €8.28. With another €100 of principal repaid, the second payment totals €108.28. The period is shorter and the balance is lower, so both changes reduce the interest amount.
4. Compare the result with dividing by 12. A flat monthly calculation gives €10.00 on €1,000 and €9.00 on €900. The day count calculation gives €10.19 and €8.28. To see how much of the difference comes from the shorter period, keep the original balance unchanged. At €1,000, 28 days would earn €9.21. Reducing the balance to €900 brings the amount down to €8.28.
The rate, repayment amounts and day count convention are assumptions for this example. For a specific claim, use the project listing and loan terms to check the rate and accrual start date. Confirm the day count convention with Maclear if the terms do not specify it.
Accrued interest is not guaranteed income until it is actually paid - if a borrower misses a payment, the interest that accrued for that period may be delayed rather than lost outright, and a claim's returns are never guaranteed regardless of the accrual mechanics.
Frequently asked questions
What does accrued interest mean?
Accrued interest is interest that has built up under the loan terms and is still awaiting payment. It accumulates over the days in the interest period and is due on the scheduled payment date. The amount accrued and the amount credited to an investor’s account can differ if the borrower pays late.
Why isn’t a month’s interest just the annual rate divided by twelve?
Dividing by twelve assumes every period represents the same fraction of a year. Under a convention that counts actual days with a fixed denominator, a 31-day period earns more than a 28-day period on the same balance at the same annual rate. The claim’s day count convention determines the calculation.
What happens to accrued interest if a claim is sold on the Secondary Market?
On Maclear, unpaid accrued interest transfers to the buyer when the sale completes. The seller keeps payments already received and receives the proceeds of the sale. The buyer receives the subsequent payments under the claim, including interest that had accrued before completion and was still unpaid at that point.
Why does each later payment on an amortising loan contain less interest?
A principal repayment leaves a smaller balance on which to calculate the next period’s interest. At the same annual rate and for equally long periods, the smaller balance produces less interest. Where period lengths differ, a longer period can partly or fully offset the effect of a lower balance.
From what date does interest start accruing on a claim?
Interest starts on the date specified in the claim’s terms. Maclear’s published guidance says it starts when the loan is transferred to the borrower. That date can fall after the investor commits money to a project, so the commitment date alone is insufficient for calculating the first period’s interest.
Maclear AG is a Swiss peer-to-peer (P2P) lending and crowdlending platform, headquartered in Switzerland. The company acts as a financial intermediary in the non-banking sector and is a member of PolyReg SRO, in accordance with Swiss financial regulations, particularly regarding AML, KYC, and GDPR. Maclear provides individual and qualified investors access to carefully selected business loan opportunities, with integrated risk assessment, a Provision Fund, and a Secondary Market for liquidity.
The content of this article is provided for informational and educational purposes only. It does not constitute investment, financial, tax, or legal advice. Peer-to-peer (P2P) lending and crowdlending investments carry a risk of partial or total loss of capital. Past performance does not predict future results. Liquidity on a secondary market is not guaranteed. Readers are encouraged to conduct their own research and consult qualified advisors before making any financial decisions. The availability of products and services may be restricted in certain jurisdictions.