When you owe money, the balance on your account isn’t always as simple as the original amount borrowed. Over time, debt can grow—sometimes significantly. One of the key reasons for that is interest. But does all debt collect interest? And how does it work when your debt is placed in collections?
At Advanced Collection Bureau (ACB), we help landlords, property managers, and business owners recover unpaid debts every day. Understanding how interest is—or isn’t—added to debt can help you make informed decisions, whether you're trying to resolve a balance or recover one from someone else.
The Basics: What Is Interest on Debt?
Interest is the cost of borrowing money. Lenders and service providers often charge interest as a way to make up for the time they go unpaid. The longer the debt goes unresolved, the more interest can accrue. This is common with credit cards, personal loans, and medical debt.
However, interest terms are typically agreed upon up front in the original loan or service contract. If the original agreement does not include interest, then a debt collector cannot randomly add it later without legal or contractual basis.
If you’re trying to collect on a tenant’s unpaid rent or damages, you might be wondering if you can add interest or late fees. That depends on what’s in your lease agreement. For more guidance, see How to Collect Unpaid Rent Without Legal Trouble.
Does Debt Collect Interest in Collections?
Once a debt is turned over to a third-party collection agency, interest may or may not continue to accrue. Whether it does depends on:
- The original contract terms
- State laws
- The policies of the creditor and collector
Some states allow agencies to charge interest on a debt during the collection process, while others prohibit it unless a court judgment is obtained. At ACB, we do not add interest to debts. Our collection model is based on fairness and transparency. The amount you owe is the amount we work to recover—no added fees or interest.
This approach is part of our commitment to ethical debt collection, which you can learn more about in How ACB Builds Trust Through Transparent Collections.
Can Creditors Charge Interest After Sending a Debt to Collections?
Yes, in some cases. For example, if your lease or loan agreement includes a clause that allows for continued interest even after the account is past due, that may still apply during collections. But these charges must be clearly outlined in the original agreement, and they must comply with state and federal laws.
As a creditor, it’s important to understand what your lease or customer agreement allows. If you’re unsure, consult with a legal professional or read more in Should Landlords Hire a Debt Collection Agency?.
How to Protect Yourself From Excessive Interest
If you are someone dealing with a debt in collections, here are a few ways to protect yourself:
Review your original agreement. Know whether interest was part of the original terms.
Ask for a validation letter. Collection agencies must provide a breakdown of what you owe and why.
Stay in communication. The sooner you respond, the better your chances of resolving the debt without additional consequences.
If you feel the amount is incorrect or inflated, read How to Dispute a Debt Collection Claim for step-by-step guidance.
Final Thoughts: Interest Can Be Complicated—But It Should Never Be Hidden
Whether you’re trying to resolve a debt or collect one, interest can impact the final amount involved. Some debts legally accrue interest, while others do not. At ACB, we believe in keeping things simple. We don’t tack on extra charges or surprise fees. Our job is to help recover the original amount owed and do it professionally.
If you're a business owner or property manager looking to recover unpaid debts without the added stress of hidden costs, we’re here to help. With no upfront fees and a 100 percent U.S.-based team, ACB delivers straightforward, reliable results.
