Interest rates are compensation for the time-value of money, and are calculated on judgments (the amount of money one party to a lawsuit is ordered to pay another party) based on the applicable state or federal statutes. There are often different interest rates set by law for prejudgment interest (the interest on the amount owed before the judgment) and post-judgment interest (the interest on the amount owed after the judgment). The calculation of prejudgment and post-judgment interest rates vary from state to state (and in federal court), and require a careful analysis of the statutes.

In Alabama, interest rates on judgments are governed by state law. Prejudgment interest, which is the interest accrued from the time the money is owed until a judgment is entered, is not typically awarded unless the amount owed is liquidated or certain, or if the claim is based on a contract that specifies an interest rate. Post-judgment interest, which is the interest that accrues after a judgment has been entered, is set by statute. As of the knowledge cutoff in 2023, Alabama Code Section 8-8-10 specifies that the legal rate of interest, unless otherwise stipulated by contract, is 6% per annum. However, if a judgment does not specify a rate, then under Section 8-8-8, the rate of interest on money decrees and judgments is the same rate as the original contract claim, or if there is no contract rate, then at a rate of 7.5% per annum. It is important to note that these rates are subject to change by legislative action, and an attorney can provide the most current information and assist with the calculation of interest on a case-by-case basis.