When you borrow money, the lender charges you for using the funds. This charge is interest. The cost of the credit is paid for in small amounts over the life of the loan. Every monthly payment includes repayment of some of the borrowed amount (principal) and some of the cost of borrowing the money (interest).

Monthly payment = principal payment + interest

The mathematical formula for the computation of interest is as follows:

Interest = Principal x Rate x Time(in years)

As an example, if an individual borrows $1,000 at 12% interest due in one year, the calculation would be:

Interest = $1,000 x .12 x 1

Interest = $120

At the maturity of the loan, the borrower would pay $120 interest plus $1,000 principal for a total of $1,120.

The fractional part of a year involved in a loan is computed on the basis of a 365/366 day year using actual days of each month. If an individual borrowed $1,000 at 7.25% interest and repaid in monthly instalments over one year, the calculation would be as follows:

Date of Payment	Payment Amount	# of Days Since Last Principal Reduction	Principal Reduction	Accrued Interest	Principal Amount
08/25/09	--	--	--	--	$1,000.00
09/10/09	$50.00	16	$46.82	$3.18	$953.18
09/25/09	$100.00	15	$97.16	$2.84	$856.02
10/25/09	$75.00	30	$69.90	$5.10	$786.12
11/30/09	$75.00	36	$69.38	$5.62	$716.74
12/25/09	$50.00	25	$46.44	$3.56	$670.30
01/25/10	$75.00	31	$70.87	$4.13	$599.43
02/09/10	$80.00	15	$78.21	$1.79	$521.22
03/15/10	$75.00	34	$71.48	$3.52	$449.74
04/20/10	$100.00	36	$96.78	$3.22	$352.96
05/15/10	$75.00	25	$73.25	$1.75	$279.71
06/25/10	$75.00	41	$72.72	$2.28	$206.99
07/15/10	$75.00	20	$74.18	$0.82	$132.81
08/25/10	$133.89	41	$132.81	$1.08	--
Totals	$1,038.89	--	$1,000.00	$38.89	$0.00

As you can see from the above table, the number of days between payments and the principal balance on the loan makes a difference in the amount of interest due. Interest is always collected first with each payment before any funds are applied to principal.

Tribal Credit employees are available to explain interest and how it is calculated.
Give us a call at 509.634.2664 or drop by our office.

To Current and Future Customers of Colville Tribal Credit

This letter is offered to help explain the topic of “acceleration of debt” and how it interacts with loan collection at Tribal Credit.

Acceleration of debt is triggered when a loan account has not been timely paid, Tribal Credit has issued final default to the borrower, and a borrower tries to make a periodic loan payment after a final default deadline. This can sometimes lead to confusion from the borrower about why Tribal Credit would refuse a loan payment.

Tribal Credit has a collection practice of attempting to make contact with a borrower that has missed a required loan payment, and when these initial attempts are unsuccessful, Tribal Credit will send a “final default notice” letter to the borrower. Sometimes Tribal Credit will issue a final default notice that will state that the borrower needs to pay a specific dollar amount within a specified number of days. Sometimes these final default notices will state that the borrower needs to try to negotiate a mutually acceptable payment solution with Tribal Credit by a specified date. Under either of these circumstances, when the borrower does not timely perform the stated task by the default notice deadline, the debt is deemed “accelerated”.

When a debt is accelerated, the entire principal balance of the loan, in addition to any periodic payment amounts previously owing, becomes immediately due. Acceleration of the debt thus changes the payment schedule for the loan from one of periodic scheduled payments, to a requirement to pay back the entire loan.

In addition, once acceleration of the debt occurs, Tribal Credit will usually return a periodic loan payment sent in from a borrower. One reason for this is that a lender that accelerates the debt cannot accept a partial payment from the borrower without raising a risk that this act will be seen as eliminating the current default on the loan (sometimes referred to as “curing” the debt).

In closing, the important point is to act promptly when you receive a final demand notice from Tribal Credit and to not believe that you can avoid collection on the entire balance of the loan by sending in a tardy partial payment after the deadline in a demand letter has expired.

Thank you again for the opportunity to serve you.

Colville Tribal Credit Corporation.

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