How long do you have to collect interest on an unpaid invoice?

As long as the underlying debt is still legally collectible. Late-payment interest has no separate statute of limitations; it is part of the debt claim. Once the limitations period on the debt expires, the interest claim expires with it. The period varies: 6 years in the UK, 3 years in New York, 8 years in Ohio for contract claims, and 2 or 5 years in France depending on the transaction.

Does the statute of limitations apply to late payment interest separately?

No. Interest on an unpaid invoice is treated as part of the debt, not as its own claim with its own clock. If your contract sets a late-payment rate, that interest accrues for as long as the debt itself remains enforceable, and stops being recoverable once the debt is time-barred.

Can you still collect interest if the client paid the invoice late?

Yes, if the contract or your terms provided for it. Paying the principal does not automatically erase accrued interest. Invoice the interest separately and promptly; waiting months to mention it makes collection harder in practice, even when you are legally entitled to it.

Does getting a judgment extend how long you can collect?

Yes. A court judgment replaces the original limitations period with the judgment's own enforcement period, which in most US states runs about 10 years and can often be renewed. In the UK, a County Court Judgment effectively removes the 6-year limitation. That is one reason creditors sue before the original deadline: the judgment resets the clock.

How to Write a Late Payment Interest Clause in a Contract That Holds Up

Guides · Updated October 2026

The invoice was 60 days overdue. The work was delivered, the client was happy with it, and the payment just never arrived. The freelancer had no contract clause covering late payment, so the only tool was a polite email. That is the situation a late payment interest clause exists to prevent. It does not make anyone pay faster by magic. It makes the cost of paying late explicit before the work starts, when you still have the upper hand.

A clause that holds up has five parts. Miss one and the clause gets weaker, sometimes to the point where a client can ignore it.

First, the rate, stated two ways. Write both the monthly and the annual figure: 1.5 percent per month, 18 percent per annum. Stating the annual rate matters because some jurisdictions require it. Canada's Interest Act, for example, requires the annual rate to appear in the contract, and a monthly-only rate can fail there. Second, the start date: interest runs from the due date, not from the invoice date and not from whenever you get around to mentioning it. Third, simple or compound. Use simple interest. Compounding looks aggressive, complicates the math, and hands the client something legitimate to argue about. Fourth, the legal cap: "or the maximum rate permitted by law, whichever is lower." State usury limits can cap what you can charge, and that sentence keeps the clause enforceable instead of void. Fifth, the dispute rule: disputes must be raised in writing within a set window, and undisputed amounts stay payable on time. Without that, a client can freeze the whole invoice by questioning one line item.

How to write a late payment interest clause in a contract: a sample

Here is a clause I would hand to a freelancer to adapt, with their own numbers filled in. This is general information, not legal advice, and a lawyer should review anything that will govern a large contract.

Sample clause. Payment is due within 30 days of the invoice date (Net 30). Amounts unpaid after the due date bear interest at 1.5% per month (18% per annum), calculated on a simple basis from the due date until paid in full, or the maximum rate permitted by law, whichever is lower. The client must raise any invoice dispute in writing within 10 days of the invoice date; undisputed amounts remain payable by the due date. If an invoice remains unpaid 30 days after its due date, the provider may pause work until payment is received, with delivery dates moving accordingly.

Read that clause again and notice what it does not do. It does not threaten collections. It does not mention lawyers. It does not apologize. It states a price for late payment the way a contract states a price for anything else. That tone is deliberate. The clause works best when it reads like standard business practice, because it is standard business practice. Large companies have had clauses like this in their own contracts for decades. Small businesses and freelancers are usually the ones who forget to include one.

The math, so the clause means something

A clause with a rate nobody can picture is decoration. Run one example. A $10,000 invoice, 45 days late, at 1.5 percent per month simple interest. The annual rate is 18 percent. Interest equals $10,000 times 18 percent times 45 divided by 365, which comes to $221.92. That is the number the clause produces. It is not a windfall. It is roughly the cost of carrying the client's balance for six weeks, and it is small enough that a reasonable client will not fight it.

The UK version is worth knowing for comparison, because it shows what a statutory default looks like. Under the Late Payment of Commercial Debts (Interest) Act 1998, UK suppliers can claim statutory interest at 8 percent above the Bank of England base rate, plus a fixed recovery fee of 40 to 100 pounds depending on invoice size. US freelancers have no equivalent federal default. In the US, the contract decides, and state law caps it. That is exactly why the clause matters more for US freelancers than for anyone else. Nobody will supply the term for you if you leave it out.

One last point, and it is the one people resist. Put the clause in the contract before the work starts, and mention it when you send the contract over. A late payment clause that first appears on an overdue invoice looks like retaliation, and clients treat it that way. The same clause in the original agreement reads like professionalism. The words are identical. The timing is the whole difference.

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Frequently asked questions

What should a late payment interest clause include?

Five parts: the rate stated monthly and annually, the start date (the due date), simple rather than compound interest, a cap at the maximum rate permitted by law, and a dispute rule requiring written disputes within a set window while undisputed amounts stay payable.

What is a reasonable late payment interest rate to put in a contract?

1.5 percent per month, or 18 percent per annum, is the most common figure in US freelance and small business contracts. It is high enough to motivate on-time payment and low enough that courts rarely treat it as a penalty. Check your state's usury cap before going higher.

How much interest is owed on a $10,000 invoice 45 days late at 1.5% per month?

About $221.92. The math is $10,000 times 18 percent annual times 45 divided by 365 days, using simple interest.

Should late payment interest be simple or compound?

Simple. Compounding complicates the calculation, looks aggressive to clients, and gives them something legitimate to argue about. Simple interest on the outstanding balance is the standard for invoicing.

Can I charge late payment interest if my contract has no clause?

Sometimes, if a statute applies. UK suppliers have a statutory default under the 1998 Act. In the US there is no general federal default, so the contract decides and state law caps it. A clause in the original agreement is far more reliable than arguing about implied terms after the fact.

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