Legal Question in Credit and Debt Law in California

Yes. More than likely your agreement allows a charge of interest per month on arrears. You might want to call the lender and see if it will forgive some or all of the interest if you pay the lump sum. Sometimes they just might be willing to do that.

It would depend on the terms of your loan agreement whether your lender can add the unpaid interest to principal and then charge interest on it. No matter what kind of agreement you have, however, the amortized payments of $250/mo. presume that you make those payents on time. When you miss the first $250 payment, even if the lender does not charge interest on the interest from that payment, then next payment's interest will be on more principal than the payment schedule is based on. Therefore you owe another months interest on the principal that should have been paid the previous month. So suppose you owe 10000 that is to be paid off in $250/mo payments at 12% interest. On your first month's payment, you would owe 1% interest (12%/12mos) and the rest would go to principal. So you would pay $150 to principal and $100 interest. The next month you should pay only $98.50 interest and $151.50 would go to principal, but because you didn't pay the last month, you owe $100 interest again. So in order to make the pay-off schedule you would have to pay $251.50. At the end of ten months, even without charging interest on the interest, you will have accumulated a lot of additional interest due just on the principal that was supposed to have been paid down according to the payment schedule but was not. Until you pay that, on top of the $2,500, you are not caught up on your debt.