Late fees are charges incurred when debts and other financial obligations are not paid by an agreed-upon date. Borrowers are informed of these fees before they enter into an agreement, and they must be reasonable — usually ranging between $25 to $50. For borrowers, late fees can cause an increased account balance and can hurt their credit history.

Late fees can be divided into two categories – contractual and statutory. Contractual late fees are those outlined in a contract when a loan is taken out. These include late fees for mortgages and other credit cards. Statutory late fees are extra charges collected when laws require it. In some states, for instance, tenants who do not pay rent on time will be charged a statutory late fee.

It is important for borrowers to be aware of late fees and the consequences of not making payments on time. Missing payment due dates can have a long-term financial impact and should be avoided whenever possible. It is also important to understand a lender’s policy on late fees, as some lenders may waive late fees if the payment is received within a certain time frame.

When operating a business, late fees can be a useful tool to help ensure timely payments are made. Businesses should set a policy on late fees and be sure to explain that policy to customers before they enter into an agreement, as this will help making collections easier. Late fees should also be reasonable, because excessive fees may deter customers from conducting business with the company.

In conclusion, late fees are additional charges incurred when certain debts are not paid by their due date. They must be explicitly outlined and must be reasonable to avoid deterring potential customers. Borrowers and business owners should be aware of late fees and the consequences of not being prompt with payments.