HopefullyInLawSchool
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Simple English definitions for legal terms
anatocism
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A quick definition of anatocism:
ANATOCISM: Anatocism is a big word that means when you borrow money and have to pay back more than you borrowed because of interest. It's like when you plant a seed and it grows into a big tree, and then you get more seeds from the tree to plant and grow even more trees. It's the same with money, where you pay interest on the original amount borrowed, and then you have to pay interest on the interest too. This is called compound interest, and anatocism is the practice of doing this.
A more thorough explanation:
Definition: Anatocism is a rare term that refers to the practice of compounding interest or charging interest on interest.
Example: If you borrow $1000 at a 10% interest rate per year, after one year, you will owe $1100. If you continue to owe that amount and the lender charges an additional 10% interest on the $100 interest from the previous year, you will owe $1210 after two years. This is an example of anatocism.
The example illustrates how anatocism works by showing how interest can accumulate over time and increase the amount owed. It is important to understand the terms of a loan or investment to avoid unexpected charges or fees.