My question involves personal finance in the State of: California


Can someone please explain how the following language written in a security agreement (Mortgage of Chattels) should be calculated?

“[…..]In installments as herein stated, for value received, I promise to pay to [Lender/Payee], or at a place to be designated by the payee, TWENTY FIVE THOUSAND FIVE HUNDRED AND NO/100 DOLLARS, with interest from [first payment date], on unpaid principal at the rate of twelve (12%) percent per annum; principal and interest payable in installments of $300.00 or more on the same day of each and every month, beginning on the [0th] day of [month & year] and continuing until paid in full.”

One of my bankers told me he thinks it should be calculated at 0.949% per month because it compounds annually. The Lender/Payee thinks it should be calculated at 1% per month because it compounds monthly. The gap between the two methods of calculating this interest rate is $3,172.53.

Can someone who actually knows how to interpret the above language tell me how a California court will likely interpret and calculate this?