Here’s a quick quiz to test your knowledge.
Which one of the following statements is correct?
1. Principal and interest are for the month that you are paying.
2. Principal is for the prior month and interest is for the month that you are paying.
3. Principal and interest are for the prior month.
4. Principal is for the month you are paying and interest is for the prior month.
# 4 is correct.
Interest is always collected in arrears and this is why you pay interest on the remainder days of the month on the closing statement.
Note: No legal advice or suggestions are being given.
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