24 Hour Loans glossary of financial terms

Add-on Interest

Add-on interest is a method of charging interest that is used by some lenders in certain lending cases. This interest method basically works by taking the sum of money that is to be borrowed, calculating the interest that will become due on that sum as a whole and then adding the two together ? this is the add-on element.

The figure that results from this calculation will be divided by the term of the loan ? i.e. how long it will take to be repaid. This will then set the levels of the actual regular repayments to be made ? these repayments will therefore be fixed for the life of the loan. You?ll mostly find that add-on interest is used for loans such as car loans, for example. This kind of interest calculation may not suit everybody ? many other loans, for example, calculate interest on the amount that is still owed once payments have been made.