Ace the Obligations and Contracts Challenge 2026 – Unlock Legal Success!

When a loan is to be repaid in installments covering both principal and interest, a payment made toward the principal without any statement about interest is treated as including the interest as well. This protects the creditor’s right to receive interest and prevents ambiguous payments from being used to speculate on whether interest has been paid. In effect, the payment is presumed to extinguish both the principal due and the interest that would have accrued for that period, unless there is clear evidence that the payer intended to pay only the principal.