Two different kinds of interest with two different justifications
Post-judgment interest runs from the entry of judgment until it is satisfied. Its purpose is to stop a defendant profiting by delay: if money owed under a judgment earned nothing while an appeal ran, every judgment debtor would appeal. The rate is fixed by statute, not by the parties, and it applies automatically without anyone asking for it. Federal judgments use the rate in 28 U.S.C. 1961, tied to a recent Treasury yield and compounded annually; state judgments use rates set by their own statutes, some fixed at a number written into the code decades ago and some floating against a benchmark.
Prejudgment interest covers the period between the day the claim accrued and the day judgment was entered. Its purpose is compensation rather than deterrence: the plaintiff has been out of pocket since the loss occurred, and a bare award of the loss undercompensates them for the delay. It is not automatic. Whether it is available at all depends on the kind of claim, and jurisdictions differ sharply — liquidated sums such as an unpaid invoice usually attract it, while unliquidated damages for pain and suffering often do not.
Once the two are combined into a single judgment, post-judgment interest runs on the whole figure, including the prejudgment interest that was merged into it. That is not a compounding trick; it is what happens when a court reduces everything to one sum and that sum becomes the principal.
Simple, compound, and the order payments are applied
Simple interest is principal times rate times the fraction of a year elapsed. It does not accrue on unpaid interest, so a judgment left unpaid for ten years at 9% owes 90% of the principal in interest and no more. Most state post-judgment statutes specify exactly this, and applying compounding where the statute does not authorise it overstates the balance — a mistake that can be worth a great deal on a large judgment left outstanding for years.
Compound interest accrues on the running balance. Federal judgments compound annually under 28 U.S.C. 1961, which over ten years at 9% produces a multiplier of 1.09 raised to the tenth power, or 2.3674, against 1.90 under simple interest. The gap widens with time and with rate, which is why the compounding basis is the first thing to check on any long-outstanding judgment.
The day-count basis is the small detail that shifts a figure by about 1.4%. Dividing by 360 rather than 365 makes each day worth 365/360 of what it would otherwise be. Statutory interest is normally computed on a 365-day year; a 360-day basis mostly appears in commercial instruments carried into a judgment.
The order of application matters more than most people expect. A partial payment is applied first to interest that has already accrued and only then to principal, which is the general rule in American practice. The consequence is that a partial payment reduces the daily accrual by less than its face amount: on the default figures, a $10,000 payment retires $8,153.01 of accrued interest and only $1,846.99 of principal, so the daily accrual falls by about 18 cents rather than by $2.47. If a settlement is being structured around instalments, the difference between crediting payments to interest first and crediting them to principal first is worth putting in writing.
Worked example: an $85,000 judgment two years on
The claim accrued 400 days before judgment. The jurisdiction allows prejudgment interest at 6% simple. Judgment of $85,000 was entered two years ago, the post-judgment rate is 9% simple on a 365-day year, and the defendant paid $10,000 exactly one year after judgment.
- Prejudgment interest. $85,000 × 6% × 400 ÷ 365 = $5,100 × 1.0958904 = $5,589.04.
- The judgment as it stands. $85,000 + $5,589.04 = $90,589.04. This is now the principal.
- Year one. $90,589.04 × 9% × 365 ÷ 365 = $8,153.01 of interest accrued when the payment arrives.
- Apply the payment. $10,000 covers the $8,153.01 of accrued interest in full, leaving $1,846.99 to reduce principal. Principal becomes $90,589.04 − $1,846.99 = $88,742.05.
- Year two. $88,742.05 × 9% = $7,986.78.
- Total owed today. $88,742.05 of principal + $7,986.78 of unpaid interest = $96,728.83.
- Check the arithmetic another way. $85,000 of judgment + $5,589.04 + $8,153.01 + $7,986.78 of interest − $10,000 paid = $96,728.83. The two routes agree.
- Daily accrual now. $88,742.05 × 9% ÷ 365 = $21.88 a day, which comes to a further $7,986.78 over the next year for as long as the judgment is unsatisfied.
How to read the result
The daily accrual figure is the one to write down, because it is what a payoff demand has to state. A judgment creditor asked for a payoff amount gives a figure good through a stated date plus a per diem, and getting the per diem wrong means either leaving money on the table or refusing a payment that was actually sufficient. Note that the per diem changes every time a payment is made, and under simple interest it changes only by the part of the payment that reached principal.
The interest-as-a-share figure tells you how much of the current balance is time rather than damages. Past a few years at a high statutory rate this becomes the dominant term, and it changes the settlement dynamic: a debtor who cannot pay in full is watching the number grow faster than they can save, which is often the strongest argument for accepting a discounted lump sum. From the creditor's side, a statutory rate well above what the money would earn elsewhere makes waiting genuinely profitable, provided the judgment is collectible.
That proviso is the whole game. Interest on an uncollectible judgment is bookkeeping. Judgments have enforcement lifespans set by statute — commonly five to twenty years — and are usually renewable if you file before expiry, but a lapsed judgment cannot always be revived. Before running this calculation forward five years, check when yours expires and what has to be done to renew it.
What $100,000 grows to at each rate and basis
| Rate | 5 years simple | 5 years compounded annually | 10 years simple | 10 years compounded annually |
|---|---|---|---|---|
| 4% | $120,000 | $121,665 | $140,000 | $148,024 |
| 6% | $130,000 | $133,823 | $160,000 | $179,085 |
| 9% | $145,000 | $153,862 | $190,000 | $236,736 |
| 12% | $160,000 | $176,234 | $220,000 | $310,585 |
The gap between the two conventions is small in the first year and large by year ten: at 12% it is $90,585 on a $100,000 judgment. Establish which one your statute specifies before relying on any figure.
Where judgment interest calculations go wrong
- Using the current statutory rate for an old judgment. Many statutes fix the rate as of the date of entry, so a judgment entered when the rate was 12% keeps 12% even after the statute changes.
- Compounding when the statute says simple. The difference is invisible in month one and enormous in year ten. Federal judgments compound annually; most state judgments do not.
- Applying payments to principal first. The general rule is interest first. Doing it the other way understates the balance and will be corrected on any contested accounting.
- Assuming prejudgment interest is available. It frequently is not on unliquidated damages, and the rate and the accrual date differ from the post-judgment ones even where it is.
- Ignoring a stay or a supersedeas bond. Interest generally continues to run during an appeal, which is precisely why the bond is required, but the terms of a stay can alter the arithmetic.
- Forgetting costs and attorney fees. Awarded costs and fees may carry interest from a different date than the damages, and in some jurisdictions from the date they are taxed rather than the date of judgment.
Judgment interest in the wider settlement picture
An unpaid judgment accruing at a statutory rate is one of the strongest inputs into a settlement negotiation, on both sides. Run the litigation expected value calculator with the accrued figure rather than the original judgment when you are weighing an appeal, because the downside of losing the appeal includes every day of interest that ran while it was pending. From the claimant's side, the contingency fee net settlement calculator shows what actually reaches you after the fee and the case costs come out of the enlarged total.
Where the debtor is insolvent, interest becomes academic quickly: the debt settlement versus bankruptcy calculator shows why a debtor facing a growing judgment often has a cheaper route available, and most judgment debts are dischargeable in bankruptcy unless they arise from fraud, wilful injury or a domestic support obligation. Against an estate rather than a person, the probate fees calculator covers the administration costs that rank ahead of most claims.
If you are simply valuing a future stream of payments rather than accruing interest on an unpaid sum, the arithmetic runs the other way: see the structured settlement present value calculator for discounting, and the compound interest calculator for the general growth formula this page applies with a statutory rate in place of a market one.
The rate is jurisdictional and it is not always fixed
There is no national judgment interest rate. Federal judgments follow 28 U.S.C. 1961, which sets the rate by reference to a recent Treasury auction yield and compounds annually. State rates range from single digits tied to a floating benchmark to double-digit fixed rates written into statute long ago, and several states apply different rates to different kinds of judgment — tort against contract, or judgments against public entities. Take your rate from the statute for your judgment date, and check whether it floats.