After late fees, to what is the Dryer Vent Squad borrower's payment credited next?
Dryer_Vent_Squad Franchise · 2024 FDDAnswer from 2024 FDD Document
- 5. ALLOCATION OF PAYMENTS. Payments shall be first credited to any late fees due, then to interest due and any remainder will be credited to principal.
Source: Item 23 — RECEIPTS (FDD pages 51–207)
What This Means (2024 FDD)
According to the 2024 Dryer Vent Squad Franchise Disclosure Document, payments made by a borrower are first applied to any outstanding late fees. After late fees are settled, the subsequent allocation is towards any interest due. Finally, any remaining amount of the payment will be credited towards the principal balance of the loan.
This order of payment allocation is important for Dryer Vent Squad franchisees to understand, as it affects how quickly they can reduce the principal amount of their loan. Paying late can result in more of the payment going towards fees and interest rather than reducing the principal balance.
This type of payment allocation is fairly standard in lending agreements. Franchisees should strive to make timely payments to minimize the amount allocated to late fees and interest, thereby accelerating the reduction of their principal debt.