This section is from the book "The Business Man's Encyclopedia", By 27 Experts. Also available from Amazon: The Business Man's Encyclopedia.

Interest is commonly defined to be a compensation for the use of money or value, though literally it is the use of money.

The amount received or paid for interest is usually a percentage on the amount used, and is either fixed by contract or by statute. Per cent signifies by the hundred and implies, in interest, so many cents on the hundred cents, or so many dollars on the hundred dollars, etc. The usual custom is to reckon interest by the year, but it is better to express the time in the note or other instrument, as it is not necessarily understood. The following simple rule for calculating interest at 6 per cent will be of assistance.

Call every year .06, every two months .01, every six days .001, and any less days sixths of one mill; then to ascertain the interest:

Multiply the principal by the rate per cent expressed decimally; or, cut off two figures from the right of dollars in the principal by a decimal point, and the result will be the interest for 60 days; then multiply this result by one-half the number of months required, to which add for days that proportion of the interest for 60 days, which the given number of days is of 60.

To find the interest on any sum at 3, 4, 5, 6, 7 1/2, and 10 per cent for one month:

At 3 per cent remove the decimal point two places to the left, divide by 4 and the quotient will be the interest for one month.

At 4 per cent remove the decimal point two places to the left, divide by 3 and the quotient will be the interest for one month.

At 5 per cent remove the decimal point one place to the left, divide by 24 and the quotient will be the interest for one month.

At 6 per cent remove the decimal point two places to the left, divide by 2 and the quotient will be the interest for one month.

At 7 1/2 per cent remove the decimal point one place to the left, divide by 16 and the quotient will be the interest for one month.

At 8 per cent remove the decimal point one place to the left, divide by 15 and the quotient will be the interest for one month.

At 10 per cent remove the decimal point one place to the left, divide by 12 and the quotient will be the interest for one month.

The following rules are in general use among business men, and may prove of assistance in calculating interest:

Multiply the amount of the note or other instrument by the number of days before it becomes due, point off the right-hand figure and divide by the numbers stated in the following table:

border="0">4 per cent divide by.............9 | 10 per cent divide by...36 |

5 per cent divide by...........72 | 12 per cent divide by.... 3 |

6 per cent divide by.... ......6 | 15 per cent divide by...24 |

8 per cent divide by...........45 | 18 per cent divide by.... 2 |

9 per cent divide by.............4 | 20 per cent divide by... 18 |

The rule for casting interest, when the partial payments have been made, is to apply the payment, in the first place, to the discharge of the interest then due. If the payment exceeds the interest, the surplus goes towards discharging the principal, and the subsequent interest is to be computed on the balance of the principal remaining due. If the payment is less than the interest, the surplus of interest must not be taken to augment the principal; but interest continues on former principal until the period when the payments, taken together, exceed the interest due, and then the surplus is to be applied towards discharging the principal, and interest is to be computed on the balance.

Interest Laws and Statutes of Limitations

States and Territories | |||||

Interest Laws | Statutes of Limitations | ||||

Legal Rate | Rate Allowed by Contract | Judg-ments. Years | Notes, Years | Open Accounts, Years | |

Per cent | Per cent | ||||

Albama...................................... | 8 | 8 | 20 | 6* | 3 |

Arkansas..................................... | 6 | 10 | 10 | 5 | 3 |

Arizona....................................... | 6 | Any rate | 6 | 4 | 3 |

California................................... | 7 | Any rate | 5 | 5 | 2 |

Colorada...................................... | 8 | Any rate | 20 | 6 | 6 |

Connecticut................................... | 6 | 6 | 20 | (e) | 6 |

Delaware........................................ | 6 | 6 | 10 | 6|| | 3 |

District of Columbia...... | 6 | 10 | 12 | 3 | 3 |

Florida.................... | 8 | 10 | 20 | 5 | 2 |

Georgia..................................... | 7 | 8 | 7 | 6|| | 4 |

Idaho........................................... | 10 | 12 | 6 | 5 | 4 |

Illinois......................................... | 5 | 7 | 20 | 10 | 5 |

Indiana........................................ | 6 | 8 | 20 | 10 | 6 |

Iowa........................................... | 6 | 8 | 2o(d) | 10 | 5 |

Kansas....................................... | 6 | 10 | 5 | 5 | 3 |

Kentucky................................. | 6 | 6 | 15 | 15 | 5(a) |

Louisiana..................................... | 5 | 8 | 10 | 5 | 3 |

Maine..................... | 6 | Any rate | 20 | 6(c) | 6§§ |

Maryland............................ | 6 | 6 | 12 | 3 | 3 |

Massachusetts.......................... | 6 | Any rate | 20 | 6 | 6 |

Michigan.............................. | 5 | 7 | 6* | 6 | 6§§ |

Minnesota............................ | 6 | 10 | 10 | 6 | 6 |

Mississippi................ | 6 | 10 | 7 | 6 | 3 |

Missouri................................ | 6 | 8 | 10 | 10 | 5 |

Montana................................ | 8 | Any rate | 10(b) | 8 | 5 |

Nebraska................................ | 7 | 10 | 5# | 5 | 4 |

Nevada.................... | 7 | Any rate | 6 | 4 | 4 |

New Hampshire.......................... | 6 | 6 | 20 | 6 | 6 |

New Jersey................ | 6 | 6 | 20 | 6 | 6 |

New Mexico................................ | 6 | 12 | 7 | 6 | 4 |

New York.................. | 6 | 6tt | 2o(«) | 6 | 6g§ |

North Carolina............ | 6 | 6 | 10 | 3* | 3 |

North Dakota.............................. | 7 | 12 | 10 | 6 | 6§§ |

Ohio....................... | 6 | 8 | 15 | 15 | 6 |

Oklahoma............................... | 6 | 12 | 5(h) | 5 | 3 |

Oregon................................... | 6 | 10 | 10 | 6 | 6 |

Pennsylvania.......................... | 6 | 6 | 5(/) | 6|| | 6 |

Rhode Island.......................... | 6§ | Any rate | 20 | 6 | 6 |

South Carolina....................... | 7 | 8 | 20 | 6 | 6 |

South Dakota...................... | 7 | 12 | 10(t) | 6 | 6 |

Tennessee........................... | 6 | 6 | 10 | 6 | 6 |

Texas................................ | 6 | 10 | 10# | 4 | 2 |

Utah...................... | 8 | Any rate | 8 | 6 | 4 |

Vermont.................. | 6 | 6 | 8 | 6 | 6g§ |

Tirginia................................. | 6 | 6 | 20 | 5* | 2 |

Washington............................ | 6 | 12 | 6 | 6 | 3 |

West Virginia......................... | 6 | Any rate | (o) | 10 | 5 |

Wisconsin.............................. | 6 | 10 | 20(i) | 6 | 6 |

Wyoming................................ | 8 | 12 | 5(k) | 5 | 8 |

*Under seal, 10 years, If made in State: if outside, 2 years. Unless a different rate is expressly stipulated. II Under seal, 20 years. "Store accounts; other accounts 3 years; accounts between merchants 5 years.

New York has by a recent law legalized any rate of interest on call loans of $5.000 or upward, on collateral security. Becomes dormant, but may be revived. g§ Six years from last item. (a) Accounts between merchants 2 years. (b) In courts not of record 5 years. (c) Witnessed 20 years. (d) Twenty years in Courts of Record: in Justice's Court 10 years. (e)Ne-gotiatiable notes 6 years, non-negotiable 15 years. (f) Ceases to be a lien after that period. (A) On foreign judgments 1 year. (i) Is a lien on real estate for only 10 years. {k) And indefinitely by having execution issue every five years. (l) Ten years foreign. 20 years domestic. (n) Not of record 6 years. (0) Kept alive by execution every 2 years.

To find the interest on any given sum for any number of days, multiply the principal by the number of days, then point off two places and divide as follows:

At 5 per cent divide by 72 At 6 per cent divide by 60 At 7 per cent divide by 52 At 8 per cent divide by 45 At 9 per cent divide by 40 At 10 per cent divide by 36 At 12 per cent divide by 30 Example: What is the interest on $900.00 for 8 days at 6 per cent?

Solution: 900 X 8 / 60 = $1.20 interest.

In banking nearly all the business is transacted on the basis of 30. 60. and 90 days.

To find the interest on any amount at 60 days, remove the decimal point two places to the left, and you have the interest at 6 per cent.

Increase or diminish according as the time is increased or diminished.

For 90 days add 1/2 of itself; for 30 days divide by 2; for 15 days divide by 4; for 120 days multiply by 2.

Example: What is the interest on $240 for 90 days at 6 per cent?

2.40 interest for 60 days.

1.20 interest for 1/2 of 60 days, or 30 days.

3.60 interest for 90 days.

Reduce years to months, adding the number of months, then place 1/3 of the number of days to the right of the months with a decimal point between.

Then remove the decimal point two places to the left in the principal, and divide by 2 and the result will equal the interest for one month at 6 per cent.

Multiply the interest for one month by the number of months, and the product is the interest at 6 per cent for the given time.

Continue to: