Add On Interest
Add-on interest means that when a loan is calculated, the lender takes the amount to be loaned and simply works out the interest that would be due, then adds the two amounts together. The resulting figure is then divided by the number of loan repayments you will be making, and this determines how much your agreed repayments will cost. Add-on interest can work very much against you if plan on making additional principal repayments, since the additional repayments you make will not be taken into account and the interest will not be recalculated.
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