USA Relationship between actuarial method and US Rule for partial payments

Jan 13, 2022
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United States
I'm confused by how these two concepts relate. If a creditor uses the actuarial method for an instalment loan, partial payments will result in compound interest when the payment is insufficient to cover the accrued interest at the time of payment. But the US Rule for partial payments prevents compound interest by saying the unpaid interest is tracked separately from the principal, so there is no interest on interest. Are these two concepts in conflict? And how do you know how to treat unpaid interest when the borrower's payment isn't enough to cover the interest due?


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