Pretoria News Weekend

Don’t bank on a lender letting your debt prescribe

LAST week we zoomed in on the effects of compound interest and how great earning compound interest is. Paying it is where the real pain is. Most credit lines are compounding debt, and if you default and eventually stop paying altogether, you may find yourself in some serious trouble. Interest on abandoned debt can quickly accumulate to almost double the initial principal amount.

Of course, we have the rule in South Africa, but close to double is rule states that interest on a debt will cease to run when the total amount of arrear interest has accrued to an amount equal to the outstanding principal debt.

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