Interest applicable to monetary obligations can be either contractual (agreed) or statutory (default).
Contractual interest refers to interest agreed upon by the debtor and creditor in a contract. This interest serves as compensation for the use of money or other substitutable goods that the debtor owes to the creditor. The interest rate can be specified in the contract; if not, it is presumed to be 6% annually. Contractual interest applies only to civil contracts and depends on the will of the parties.176
Key characteristics of contractual interest:
- Compensation for use – interest serves as payment for the use of financial resources owed by the debtor to the creditor.
- Agreed rate – the parties may determine the interest rate; if they do not, the law sets a default annual rate of 6%.
- Civil contracts – interest applies only to civil contracts, meaning agreements between individuals or between individuals and legal entities under civil law.
- Dependence on the parties’ will – the amount and existence of interest depend entirely on the agreement of the contracting parties.
Example: Company A lends €10,000 to Company B for one year. In the contract, they agree that the contractual interest rate will be 5% per year. After one year, Company B must repay €10,500 (€10,000 principal + €500 interest). If the contract did not specify an interest rate, the legally defined annual rate of 6% would apply, meaning Company B would have to repay €10,600.
Default interest refers to interest the debtor owes the creditor due to delayed payment of a monetary obligation. This interest serves as a civil penalty for delay and is not dependent on any damage suffered by the creditor due to the delay.177 The interest rate is set by law and amounts to 8% per year unless a special law provides otherwise. The creditor and debtor may agree that the default interest rate is lower or higher than the statutory rate.178
Key characteristics of default interest:
- Civil penalty – interest serves to penalise the debtor for late payment.
- Independent of damage – interest is not tied to any actual harm suffered by the creditor due to the delay.
- Statutory rate – the interest rate is set by law and is not subject to contractual freedom.
- Mandatory payment – the debtor must pay interest from the first day of delay until the actual payment date.
The current default interest rate in Slovenia is determined by the Law on the Prescribed Default Interest Rate (ZPOMZO-1). The applicable default interest rate is prescribed by a government regulation and is updated regularly by the Ministry of Finance, based on Article 2(4) of the ZPOMZO-1.180
Example: Company A is obligated to pay Company B €10,000 for services rendered, with a due date of February 1. If Company A fails to pay on time and only settles the amount on March 1, it must pay default interest for the period of delay (one month) at the statutory annual interest rate of 12.5%:
The formula for calculating default interest = P × r × t/365
Legend:
P – principal amount, i.e., the sum on which interest is calculated
r – annual interest rate, expressed as a decimal (e.g., 12.5% as 0.125)
t – duration of delay, expressed in the number of days between the due date and the actual payment date
365 – the standard number of days in a calendar year used for daily interest calculation
This formula allows precise calculation of default interest, taking into account the time period and interest rate specified by law or agreed upon in a contract.
