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The short answer
A penalty of 1% a day is 365% a year counted simply. On ₦60,000 overdue it adds ₦600 a day, ₦18,000 after 30 days and ₦54,000 after 90 days; if the penalty is added to the balance daily and charged on itself, 30 days costs about ₦20,871. What the penalty is charged on, and whether it is capped, matters as much as the rate.
Penalty interest, also called default interest or a penal charge, is an extra rate charged when a repayment is late. Some loan app terms set it at a percentage per day; bank terms more often set it per month. The difference between the two is enormous, and the arithmetic is worth doing before a few late days turn into a few late months.
1% a day as a yearly rate
1% a day multiplied by 365 days is 365% a year, before compounding. By comparison, a penalty of 1% a month is 12% a year. A daily penalty of 1% is therefore about thirty times heavier than a monthly one of the same headline figure. If a 1% daily penalty were compounded every day for a full year, the multiplier would be about 37.8 times the starting amount, an increase of roughly 3,678%. Few loans run that long in arrears, but the figure shows why the period in the penalty clause, day or month, is the first thing to read.
Published bank terms, as at October 2026, use monthly penalties. GTBank's QuickCredit page says a fee of 1% flat per month (approximately 12% a year) over the approved lending rate applies to late payment. Access Bank's Salary Advance FAQs describe a 1% penal charge per month from 30 days past due. Check your own agreement for the figure that applies to you.
Worked example: ₦60,000 overdue at 1% a day
Example figures only. An instalment of ₦60,000 is overdue. The agreement charges 1% a day on the overdue amount. The table shows the penalty under the two common methods.
| Days late | Simple (1% of ₦60,000 each day) | Compounded daily (penalty added to the overdue amount) |
|---|---|---|
| 7 | ₦4,200 | ₦4,328.12 |
| 30 | ₦18,000 | ₦20,870.93 |
| 60 | ₦36,000 | ₦49,001.80 |
| 90 | ₦54,000 | ₦86,917.96 |
Under the simple method the penalty grows by the same ₦600 every day. Under daily compounding, each day's penalty is added to the amount on which the next day's penalty is worked out, so by day 90 the penalty is ₦86,917.96, more than the original overdue amount. These figures exclude normal interest, which usually continues to run as well.
What a part-payment saves
Example figures only. On the same ₦60,000 overdue at 1% a day, simple method, the borrower pays ₦30,000 on day 10 and clears the rest on day 30. Days 1 to 10 cost ₦600 a day, ₦6,000. Days 11 to 30 cost 1% of ₦30,000, ₦300 a day for 20 days, another ₦6,000. The total penalty is ₦12,000 against ₦18,000 with no part-payment, a saving of ₦6,000. This only works if the lender applies the part-payment to the overdue instalment rather than to penalties first, so ask how payments are allocated. Many agreements apply money first to penalties, then interest, then principal, which leaves the base, and the daily charge, unchanged for longer.
What the penalty is charged on
The base of the penalty changes the figure as much as the rate. Three common bases:
- Overdue instalment
- The penalty is charged only on the missed instalment. This is the example above.
- Whole outstanding balance
- The penalty is charged on everything still owed. Example: with ₦240,000 outstanding, 1% a day is ₦2,400 a day, four times the instalment-based figure.
- Overdue amount plus accrued charges
- The penalty is charged on the instalment plus earlier penalties and interest, which is the compounding case.
Our guide to the difference between a late fee and penalty interest explains how a one-off late fee compares.
Caps, rules and what is unconfirmed
Some lenders cap total penalties, for example at a fixed number of days or at a multiple of the original loan. Others do not; read the terms. For digital lenders, the FCCPC's Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations, 2025 require interest rates, repayment terms and associated fees to be disclosed in full before the transaction is completed, and say the Commission will monitor consumer lending interest rates and ensure they are not exploitative. We did not find a specific cap on penalty interest in those regulations. The FCCPC said on 20 July 2026 that it had resumed implementing them. This is information, not legal advice.
What to do if you are late
- Find the penalty clause: the rate, the period (day or month), the base, and any cap.
- Work out the penalty to date using the table method above, and compare it with what the lender shows.
- Pay the overdue amount as soon as you can; even a part-payment reduces the base if penalties are charged on the overdue amount.
- If you cannot pay, contact the lender in writing to propose a plan before penalties pile up.
- Check the lender is registered; see how to check a loan app with the FCCPC, and the grace period guide for how days are counted.
Where Pryme fits
For Loans on Spaces, lent by Solid Allianze Microfinance Bank, the agreement you accept sets out the amount, cost and repayment date in full. If you fall behind, see what happens next.
Questions people ask
How much is 1% daily interest per month?
About 30% a month counted simply, or about 34.8% if it compounds daily over 30 days. On ₦60,000 that is ₦18,000 or about ₦20,871.
Is 1% a day penalty legal in Nigeria?
We found no specific cap on penalty interest in the FCCPC's 2025 digital lending regulations, but lenders must disclose fees fully and the FCCPC monitors rates. Check the lender is registered and complain to the FCCPC if terms were hidden.
Do loan apps charge penalty on the whole loan or just the missed payment?
It depends on the agreement. Some charge on the overdue amount only, others on the whole outstanding balance, which is far more expensive.
Can late payment penalty be waived?
Sometimes. Ask the lender in writing, especially if you can show a payment was delayed by a bank or system problem.
Sources
- GTBank: QuickCredit product page and terms · accessed Oct 2026
- Access Bank: Salary Advance FAQs (PDF, undated) · accessed Oct 2026
- FCCPC: Digital, Electronic, Online or Non-Traditional Consumer Lending Regulations, 2025 · accessed Oct 2026
- FCCPC: FCCPC Resumes Digital Lending Regulation (20 July 2026) · accessed Oct 2026
This article is general information, not financial, legal or tax advice. Products described are provided under the terms on this site and are subject to regulation and eligibility.