Distinguishing Principal Interest from Default Interest

Legal Article · 12 November 2026
Av. Thomas Andreas Di Constantinople

Principal interest may arise under contract or statute in return for use of money. Default interest results from failure to pay on time. Absence of agreed principal interest does not automatically prevent default interest. The obligation's type and special provisions must be identified separately for both.

Articles 88 and 120 of the Turkish Code of Obligations refer to current legislation for unagreed rates and limit contractual rates within their respective scope. Different rules for commercial matters, consumer transactions, and special claims remain. A single rate or ceiling therefore cannot apply to all claims.

The amendment effective on 31 July 2026 linked statutory interest in Article 1 of Law No. 3095 to eighty percent of the Central Bank of the Republic of Türkiye's short-term credit rediscount rate on the preceding 31 December. If the 30 June rate differs by at least five percentage points, eighty percent of that rate applies in the second half-year. The calculation period and law before the amendment must also be observed.

Interest commencement differs from its rate. Special rules apply alongside default conditions in Article 117 of the Turkish Code of Obligations. For example, the new Article 55 provides interest from the event date for compensation relating to known-earnings periods and from judgment for unknown periods in working-capacity and support losses. The amendment applies to events occurring after 31 July 2026.

Interest on interest is governed by Article 121 of the Turkish Code of Obligations and special rules. Preservation of accrued interest when principal is paid is also assessed under Article 131. Commencement, periodic rates, and payment allocation are separate calculation elements.

Legal Basis: Turkish Code of Obligations, Articles 55, 88, 117, 120, 121, and 131; Law No. 3095, Article 1; Law No. 7589, Articles 10, 18, 26, and provisional Article 1/9. Turkish Code of Obligations, Law No. 3095 and Law No. 7589.

This article has been prepared for general legal information purposes.