Which charges are not considered interest under Louisiana law?

Under Louisiana law, prepayment charges are not classified as interest. Interest typically refers to the cost associated with borrowing money, typically expressed as a percentage of the loan amount over time. Prepayment charges, on the other hand, are imposed when a borrower pays off their loan earlier than agreed. These fees are considered penalties for early repayment, rather than compensation for the use of money over time, which is the essence of interest.

In this context, late payment fees, loan origination fees, and service charges are typically viewed as charges related to the use and management of the loan or service provided. Therefore, these can be classified as forms of interest or costs associated with the loan agreement. However, the prepayment charge stands apart because it doesn't compensate for the borrowing period but instead penalizes the borrower for settling the debt ahead of schedule. Thus, this distinction is why the prepayment charge is not regarded as interest under Louisiana law.