Calculate prejudgment interest, contractual interest, and late fees on overdue invoices with real-time accrual tracking
This calculator computes the interest and late fees owed on unpaid invoices using the methodology courts apply when awarding prejudgment interest. Prejudgment interest compensates a creditor for being deprived of money owed during the period between the breach (the unpaid invoice) and the judgment or payment date.
Prejudgment interest in all U.S. states is calculated using simple interest (not compound interest) unless a contract explicitly provides otherwise. The formula is:
Accrued Interest = Principal Amount x (Annual Rate / 365) x Days Overdue
For example, if you are owed $10,000 on an invoice that is 90 days overdue in California (10% statutory rate), the accrued interest would be: $10,000 x (0.10 / 365) x 90 = $246.58.
The interest rate depends on your specific situation:
Interest starts accruing on the day after the payment was due. If your invoice specifies "Net 30" terms, interest begins on day 31 after the invoice date. If no payment terms are stated, courts generally consider payment due upon receipt or within a reasonable time (typically 30 days).
Late fees and interest are distinct: late fees are a one-time contractual penalty triggered by late payment, while interest accrues daily over the entire overdue period. Both can apply simultaneously if your contract provides for both. However, courts may refuse to enforce late fees that are deemed "penalty" clauses rather than reasonable estimates of actual damages (liquidated damages).
The following table lists prejudgment interest rates by state. These rates apply when no contractual rate is specified. Rates are subject to change by legislation; always verify the current rate for your jurisdiction.
| State | Rate | Statute | Notes |
|---|---|---|---|
| Alabama | 6% | Ala. Code 8-8-1 | Default legal rate |
| Alaska | 3.5% | AS 09.30.070 | Variable; set by court |
| Arizona | 10% | A.R.S. 44-1201 | Statutory default |
| Arkansas | 5% | Ark. Code 4-57-104 | Federal discount rate + 5% capped at 17% |
| California | 10% | Civil Code 3289(b) | Contract claims; 7% for tort claims |
| Colorado | 8% | C.R.S. 5-12-101 | Compounding allowed per agreement |
| Connecticut | 10% | C.G.S. 37-1 | Default statutory rate |
| Delaware | 5% | 6 Del. C. 2301 | Over Federal Reserve rate |
| Florida | 5.51% | F.S. 55.03 | Set quarterly by CFO |
| Georgia | 7% | O.C.G.A. 7-4-2 | Prime rate + 3% for business |
| Hawaii | 10% | HRS 478-2 | Statutory default |
| Idaho | 5.375% | Idaho Code 28-22-104 | Variable; T-bill + 5% |
| Illinois | 5% | 815 ILCS 205/2 | Statutory default |
| Indiana | 8% | IC 24-4.6-1-101 | Statutory default |
| Iowa | 5% | Iowa Code 535.2 | Variable; adjusted biannually |
| Kansas | 10% | K.S.A. 16-201 | Statutory default |
| Kentucky | 8% | KRS 360.010 | Statutory default |
| Louisiana | 5% | La. C.C. Art. 2924 | Judicial interest rate |
| Maine | 5.75% | 14 M.R.S. 1602-C | T-bill + 3%; reset annually |
| Maryland | 6% | Md. Cts. & Jud. Proc. 11-107 | Statutory default |
| Massachusetts | 12% | M.G.L. c. 231 107 | Highest in U.S.; prejudgment only |
| Michigan | 5% | MCL 438.31 | Plus inflation adjustment |
| Minnesota | 4% | Minn. Stat. 549.09 | Variable; secondary market rate |
| Mississippi | 8% | Miss. Code 75-17-1 | Statutory default |
| Missouri | 9% | Mo. Rev. Stat. 408.020 | Statutory default |
| Montana | 10% | Mont. Code 31-1-106 | Statutory default |
| Nebraska | 12% | Neb. Rev. Stat. 45-104 | Statutory default |
| Nevada | Prime + 2% | NRS 99.040 | Variable rate |
| New Hampshire | 10% | RSA 336:1 | Statutory default |
| New Jersey | 6% | N.J.S.A. 2A:14-2 | Post-judgment may differ |
| New Mexico | 8.75% | N.M. Stat. 56-8-4 | Variable; set annually |
| New York | 9% | CPLR 5004 | Statutory default |
| North Carolina | 8% | N.C.G.S. 24-1 | Statutory default |
| North Dakota | 6% | NDCC 47-14-05 | Statutory default |
| Ohio | 4% | R.C. 1343.03 | Variable; federal short-term + 3% |
| Oklahoma | 6% | 15 O.S. 266 | Statutory default |
| Oregon | 9% | ORS 82.010 | Statutory default |
| Pennsylvania | 6% | 41 P.S. 202 | Statutory default |
| Rhode Island | 12% | R.I.G.L. 6-26-1 | Statutory default |
| South Carolina | 8.75% | S.C. Code 34-31-20 | Variable; prime + 4% |
| South Dakota | 10% | SDCL 54-3-16 | Category A default |
| Tennessee | 10% | T.C.A. 47-14-103 | Statutory default |
| Texas | 5% | Finance Code 302.002 | Prejudgment; 18% max contract |
| Utah | Federal + 2% | Utah Code 15-1-1 | Variable rate |
| Vermont | 12% | 9 V.S.A. 41a | Statutory default |
| Virginia | 6% | Va. Code 6.2-302 | Statutory default |
| Washington | 12% | RCW 19.52.010 | Statutory default |
| West Virginia | 7% | W. Va. Code 56-6-31 | Variable rate |
| Wisconsin | 5% | Wis. Stat. 138.04 | Statutory default |
| Wyoming | 7% | Wyo. Stat. 40-14-106 | Court-awarded; variable |
Last verified: March 2026. Some states use variable rates tied to federal benchmarks. Always confirm the current rate with your state's statutes or a licensed attorney before filing a claim.
Common questions about calculating interest on unpaid invoices, prejudgment interest, and late fees.
California's prejudgment interest rate is 10% per annum under Civil Code Section 3289(b). This rate applies to breach of contract claims where the amount owed is "certain or capable of being made certain by calculation." For unpaid invoices, this standard is almost always met because the invoice amount is a fixed, calculable sum. For tort claims where damages are unliquidated, the rate drops to 7% under California Constitution Article XV, Section 1. Interest begins accruing from the date the amount was first due.
Yes. Even without a written contract specifying an interest rate, you are entitled to charge the statutory interest rate in your state once an invoice becomes overdue. In California, Civil Code Section 3289(b) provides a 10% default rate for any liquidated obligation. This means you do not need a contract clause authorizing interest; the law provides it automatically. The key requirement is that the amount owed must be certain or determinable from the invoice. For oral agreements, the same statutory rate applies once the debt becomes due.
The California Prompt Payment Act (Government Code Sections 927-927.13) requires state agencies to pay properly submitted invoices within 45 days. If the state fails to pay within that window, GC Section 927.6 imposes an automatic penalty of 10% of the unpaid amount (or $15, whichever is greater). For construction contracts, the timeline is typically 30 days. The Act was designed to prevent government agencies from delaying payment to vendors and contractors. Local municipalities often have their own prompt payment ordinances with similar provisions.
Simple interest is calculated only on the original principal: Principal x Rate x Time. Compound interest calculates interest on both the principal and previously accrued interest. In the context of unpaid invoices and prejudgment interest, courts in virtually every state use simple interest only. Compound interest is only enforceable if explicitly stated in a written contract, and even then, courts may refuse to enforce it if the resulting amount is deemed unconscionable. This calculator uses simple interest, which is the legally applicable method for most invoice disputes.
No. Prejudgment interest is calculated on the principal amount of the invoice only, not on late fees, penalties, or other charges. Interest and late fees serve different legal functions: interest compensates the creditor for the lost time value of money, while a late fee is a contractual penalty. Stacking interest on top of late fees would constitute impermissible "interest on a penalty." However, both amounts are included in the total claim or judgment. This calculator correctly separates principal interest from late fees in its totals.
The maximum enforceable interest rate depends on your state's usury laws and whether the transaction is between businesses or involves a consumer. In California, there is generally no usury cap for loans or debts between corporations or for business-purpose transactions. For consumer transactions, California caps interest at 10% unless a higher rate is specifically authorized by statute. Texas caps contractual interest at 18% for most transactions. Always check your state's usury statute before specifying a rate in your contract.
Yes, you can include prejudgment interest as part of your claim in small claims court. In California, the total amount (principal + interest) must fall within the small claims jurisdiction limit ($12,500 for individuals, $6,250 for businesses). When filing, calculate the interest through the expected hearing date and include it in your claim amount. Bring a clear breakdown showing how you calculated the interest to present to the judge.
Construction payment disputes often involve additional statutory protections beyond standard invoice claims. California's prompt payment statute for private construction (Civil Code Section 8800 et seq.) requires progress payments within 30 days and retention payments within 45 days of completion. Violators face a 2% per month penalty. Contractors also have mechanic's lien rights (Civil Code Section 8400 et seq.) and stop-notice remedies that do not apply to standard invoices. The interest calculation is the same, but the available remedies are broader.
Yes, sending a demand letter is strongly recommended before filing a lawsuit. A well-crafted demand letter puts the debtor on formal notice, establishes a clear record of the amount owed (including interest), and often resolves the dispute without litigation. Many courts look favorably on plaintiffs who made good-faith efforts to resolve the dispute before suing. Include the principal amount, calculated interest to date, applicable statute citation, and a deadline for payment (typically 10-30 days). Use our demand letter templates to get started.
Consider hiring an attorney when: (1) the amount owed exceeds your small claims limit, (2) the debtor is disputing the debt or raising counterclaims, (3) you need to enforce a judgment across state lines, (4) the debtor is a government entity with sovereign immunity issues, or (5) the total amount including interest justifies the legal fees. Many business litigation attorneys offer contingency or hybrid fee arrangements for collections cases, especially when the debt is well-documented with signed contracts and delivered invoices.
Need help collecting unpaid invoices, calculating prejudgment interest for a lawsuit, or drafting a demand letter? I offer consultations for California clients on business litigation and collections matters.