Calculating interest with late fees

**importantverbs** · 09-16-2011, 06:53 PM

For a class assignment I have to draft a demand letter and show my work on Excel. I have a principal amount, an interest percentage, and late fees of $35 month. I believe that the interest would be on the principal amount plus the late fee each month. Does anyone have a formula or know how I would set up this spreedsheet? Thanks so much!

**MarvinP** · 09-16-2011, 07:23 PM

Hi importantverbs and welcome to the forum,

If you use a straight formula it is hard to throw in those late charges. But if you do it a month at a time with a spreadsheet it gets easier to understand. Hope this makes sense to you. See attached.

**importantverbs** · 09-16-2011, 08:01 PM

Thanks! That helps A LOT.

My (fictional) situation involves a credit card that is 6 months late in payment with a %24 annual interest and $35/month late fee. If I plug these things in the table with that formula thingy you said breaking it down monthly will that still work or does it change since it's a credit card (and therefore without fixed payments - except that he's not paid anything so there happens to be the same payment each month of $0 dollars)

**MarvinP** · 09-16-2011, 08:34 PM

Hey,

Step through each formula in the first row of the table and figure out where each of these came from and why. You should be able to plug in 24% interest (OUCH

) and the $35 late charge. Do the first month and simply go down the rows making sure each is correct.

There is this saying that the worlds fastest potato peeler, peels them one at a time. Which means you should understand each cell in the first row and then insure the second row is ok and then you will have confidence all rows of the table are correct. You must start in cell B4 as the first potato, then C4, etc.