Know the Difference: Interest Bill vs Interest Notice

A big phone call we get is right before someone enters repayment for the first time.  They panic because they receive what they think is a bill.  In almost every way this notice looks like a bill and can often times be for thousands of dollars.  The borrower’s assume that this will be their regular payment and die a little inside.

If they would have taken a closer look at this document they would have freaked out just a little less.  On the document it typically says (usually quite prominently) “This is not a bill.”

So if its not a bill, what is it?  It is called an interest notice.  What this does is it allows a borrower to know how much interest has accrued on their account before they enter repayment from grace, forbearance or deferment.  It also gives them a chance to make a payment on any, some or none of this interest.

What is the benefit to paying this interest bill?  Well whatever you do pay will not become capitalized interest.  And as we described here, capitalized interest can really get costly.

What if you want to stay on top of things and receive a bill for your interest regular basis?  This can be covered.  It is called “an interest bill.”  An interest bill is just that, it is usually sent out quarterly and details how much interest has accrued over that time period and gives you a bill to pay it.  It is required like any other bill.  The other difference is this cannot be negatively credit reported.  If this bill goes delinquent, it will usually just be turned back into an interest notice with unpaid interest being capitalized.

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