Post by timbrockett on Nov 8, 2015 16:02:48 GMT
The GLA Covenants 11.06 require that the GLA Board charge 18% interest on all past due assessment amounts. Some GLA Board members did not understand the difference between simple interest and compounded interest. Some people on payment plans were charged 18% interest compounded yearly, also known as 18% simple interest instead of 18% interest compounded monthly as required by the Covenants. For the record here is the difference between 18% simple interest and 18% compounded interest:
Debtor 1 and 2 both owe $100.00.
Debtor 1 is charge 18% simple interest per year. At the end of one year he owes $118.00.
Debtor 2 is charged 18% yearly interest but the balance is compounded monthly.
First we divide 18 by 12 to find what the monthly interest rate is. 1.5% is the answer.
Then we charge debtor 2:
Month 1.5% interest Balance
Jan. $1.50 $101.50
Feb. $1.52 $103.02
March $1.55 $104.57
April $1.57 $106.14
May $1.59 $107.73
June $1.62 $109.35
July $1.64 $110.99
August $1.66 $112.65
Sept $1.69 $114.34
Oct $1.72 $116.06
Nov $1.74 $117.80
Dec $1.77 $119.57
Debtor 2 owes a total of $119.57 when 18% interest is compounded monthly instead of yearly. His actual yearly interest rate is 19.57%
Recalculating payment plans is easy using a financial or web based calculator and should be done quickly.
The GLA Board has floated the idea of reducing the 18% compounded interest required by the Covenants to something much less. This would be a huge gift, a reward even to all the people who have not paid their assessments. The longer a landowner has been past due the larger the reward would be. A fairer proposal would be to make everyone a ONE TIME OFFER to reduce the interest and penalties by a certain percentage....if they pay in full within 90 days.
The GLA is not a lending institution nor should it become one. 18% interest doubles the original debt every 4 years and should be a powerful incentive to pay assessments promptly and in full. A community fund, financed by voluntary donations, should be established to help the truly needy pay their assessments.
Currently about 17% of GLA Landowners are not paying assessments and the past due amount with interest and penalties is about $240,000.00 and growing.
Debtor 1 and 2 both owe $100.00.
Debtor 1 is charge 18% simple interest per year. At the end of one year he owes $118.00.
Debtor 2 is charged 18% yearly interest but the balance is compounded monthly.
First we divide 18 by 12 to find what the monthly interest rate is. 1.5% is the answer.
Then we charge debtor 2:
Month 1.5% interest Balance
Jan. $1.50 $101.50
Feb. $1.52 $103.02
March $1.55 $104.57
April $1.57 $106.14
May $1.59 $107.73
June $1.62 $109.35
July $1.64 $110.99
August $1.66 $112.65
Sept $1.69 $114.34
Oct $1.72 $116.06
Nov $1.74 $117.80
Dec $1.77 $119.57
Debtor 2 owes a total of $119.57 when 18% interest is compounded monthly instead of yearly. His actual yearly interest rate is 19.57%
Recalculating payment plans is easy using a financial or web based calculator and should be done quickly.
The GLA Board has floated the idea of reducing the 18% compounded interest required by the Covenants to something much less. This would be a huge gift, a reward even to all the people who have not paid their assessments. The longer a landowner has been past due the larger the reward would be. A fairer proposal would be to make everyone a ONE TIME OFFER to reduce the interest and penalties by a certain percentage....if they pay in full within 90 days.
The GLA is not a lending institution nor should it become one. 18% interest doubles the original debt every 4 years and should be a powerful incentive to pay assessments promptly and in full. A community fund, financed by voluntary donations, should be established to help the truly needy pay their assessments.
Currently about 17% of GLA Landowners are not paying assessments and the past due amount with interest and penalties is about $240,000.00 and growing.
