# USAHow is a "Per Annum" Loan Calculated

#### FIRE man

I loaned my mother \$43,000 to pay off her mortgage. This loan was secured with a promissory note with the language "The undersigned promises and agrees to pay to the order of Richard the sum of \$43,000, plus interest upon all principal remaining unpaid from time to time, at the rate of 7% per annum, all principal and interest due at the time of my death". My mother lived for 21 years and 4 months after I gave her the loan.

I used a deferred loan calculator from Calculator.net and came up with \$178,004 owed to me. Since there is not close to that available in the estate I submitted a claim to the estate for \$165K which is still \$120K more than is available to me.

Someone is now questioning the way I calculated the amount due.

My question is, is a per annum loan calculated compounding interest on an annual basis like I did? Or is the interest the same every year and just added to the principal? I have looked online and can't seem to find a definition per annum loan and if the interest gets compounded every year or not.

Thanks for any assistance you can provide

Richard

#### kirby

VIP Member
Per the language you used in the loan, an annual basis is used.
The interest is not the same every year. Go back to the online loan calculator you used. This time click on View schedule table, which is right under the results. That will show you the interest for each year.

#### FIRE man

Per the language you used in the loan, an annual basis is used.
The interest is not the same every year. Go back to the online loan calculator you used. This time click on View schedule table, which is right under the results. That will show you the interest for each year.
Yes I understand that the way I calculated it the interest is not the same every year as it is compounded annually. My question is using the language in the loan "7% per annum", should that be compounded annually or not compounded? Is there a standard accounting reference I can quote that says the interest is compounded annually on a "per annum" loan?

#### stevuke79

Annual interest means compounded annually unless otherwise specified.

Show them your amortization table. I get \$174,679. A few months here or there and i get your number.

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#### FIRE man

Annual interest means compounded annually unless otherwise specified.

Show them your amortization table. I get \$174,679. A few months here or there and i get your number.
Thanks for your reply, I assumed "per annum" would be compounded annually but just wanted to verify I was correct.