Is "retroactive interest" on a loan legal?

Last year I obtained a loan from Capital One for some dental work I needed to have done, and there was a one-year interest-free grace period. I specifically asked what would happen in terms of interest charges if I did not pay the entire balance off within the year, and I was told that I would only owe interest on the balance remaining.

I ended the grace period with only $200 to go . . . and received my final bill stating that I owed $200 PLUS $292-and-change in retroactive interest for the ENTIRE LOAN AMOUNT because I didn't pay it all off within a year.

I checked the contract, and yes, buried in there is something about retroactive interest, but before I pay them I want to find out if it's legal for them to charge me for it.

Thanks in advance for any help.