Accrued interest

Accrued interest is interest that has been recognized, but not yet paid or charged. It can accumulate starting from the principal payment or the last interest payout. Accrued interest occurs when the payout dates do not coincide with the cash flow timing and measurements. In home and personal loans, accrued interest is the annual rate spread out over 12 months; that is, a 12% interest accrues at 1% per month. Accrued interest grows larger the longer the loan lasts, so you can reduce your interest expenses by making bigger monthly payments.