Lenders: Can I Claim My Default Interest On Enforcement?

An issue which often comes up when a borrower defaults is establishing what can be recouped by a lender in the course of enforcement. In order to redeem a loan, both the capital made available and interest accrued must be repaid to the lender. However, how do the courts view other items such as default interest when it comes to redeeming a loan?

The treatment of default interest remains a sticking point for lenders, borrowers and their advisers and one that is treated differently between the Irish and English courts. Care must be taken when drafting these clauses. Such provisions will generally provide that default interest will apply to a sum due but unpaid under a loan agreement for the period that the sum remains unpaid stating the default rate that will apply.