Legal Question in Credit and Debt Law in Virginia

payments applied to interest only?

I have a judgement against me that has been turned over to a collection agency that I am making payments to. Any payment that I make to them is being applied to the interest only, while interest is continuing to accrue daily. No payments will apply to the principal on the account until the interest is paid in full, is this legal?? At that rate, I will never be able to pay off the interest since it is daily being added to the balance! Is it legal for the collection agency to charge interest on the full account balance (principal + interest) or can they only charge interest on the principal owed?


Asked on 6/05/01, 2:56 pm

1 Answer from Attorneys
Daniel Press Chung & Press, P.C.

Re: payments applied to interest only?

Generally, interest accrues on the principal only unless applicable law or the contract provides for compounding. But generally, payments are applied to interest and collection costs first, so the principal is not reduced until interest is paid in full. This is certainly legal unless the contract provides for a different application of payments.

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Answered on 6/27/01, 1:20 pm


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