Grace Period

AAA

DEFINITION of 'Grace Period'

A provision in most loan and insurance contracts which allows payment to be received for a certain period of time after the actual due date. During this period no late fees will be charged, and the late payment will not result in default or cancellation of the loan. A typical grace period is 15 days.

INVESTOPEDIA EXPLAINS 'Grace Period'

A grace period is usually the only a feature of a loan on which interest is calculated monthly, if it is calculated at all. Under some loan contracts, payments outstanding during grace periods are interest free, but the majority have interest compounding during the grace period. Be sure to check your loan contract for the specifics on any grace periods.

Credit cards for example, on which interest is calculated daily, do not have any grace periods.

RELATED TERMS
  1. Mortgage

    A debt instrument, secured by the collateral of specified real ...
  2. Benefit Period

    The benefit period is the length of time during which a benefit ...
  3. First-Loss Policy

    A type of property insurance policy that provides only partial ...
  4. Adequate Notice

    A written document that specifies in detail the terms and conditions ...
  5. Default

    1. The failure to promptly pay interest or principal when due. ...
  6. Past Due Balance Method

    A system for calculating interest charges based on any outstanding ...
Related Articles
  1. Credit & Loans

    How does interest work on a cash advance from my credit card?

    Find out how cash advances and regular credit card purchases are treated differently and what it means for your financial bottom line.
  2. Credit & Loans

    What's the difference between a grace period and a deferment?

    Learn the difference between grace periods and deferments and when each type of delayed-payment period applies to various types of loans.
  3. Credit & Loans

    What's the difference between a grace period and a moratorium period?

    Find out what grace periods and moratorium periods are, what you have to do to get them and how they can benefit your financial situation.
  4. Savings

    Financial New Year's Resolutions You Can Keep

    Start the year off right by evaluating your financial health and setting impactful and achievable goals.
  5. Economics

    How Interest Rates Affect The Housing Market

    Understand how rate changes can affect home prices, and learn how you can keep up.
  6. Credit & Loans

    College Loans: Private Vs. Federal

    Not all student loans are the same. Know what you're getting into before signing on the dotted line.
  7. Budgeting

    Are You Living Too Close To The Edge?

    If a missed paycheck will make your finances cave in, you must learn how to make proper supports.
  8. Home & Auto

    Option ARMs: American Dream Or Mortgage Nightmare?

    Option adjustable rate mortgages could make or break your home-buying experience.
  9. Insurance

    How do I determine the face value of a life insurance policy?

    Read about how to determined the face value for any life insurance policy, and see what circumstances can trigger a change in face value.
  10. Credit & Loans

    Capital One Cards: VentureOne Vs. Venture Rewards

    Which Capital One rewards credit card offers the best deal for you?

You May Also Like

Hot Definitions
  1. Command Economy

    A system where the government, rather than the free market, determines what goods should be produced, how much should be ...
  2. Prospectus

    A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details ...
  3. Treasury Bond - T-Bond

    A marketable, fixed-interest U.S. government debt security with a maturity of more than 10 years. Treasury bonds make interest ...
  4. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  5. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  6. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
Trading Center