How does the interest work?
Wimpykid (8 mths ago)
I have been looking at my credit agreement but I'm still not sure exactly how the interest works, please can you help?
FLM Loans (5 mths ago)
Hi there,
Unlike most lenders we don’t add all the interest on at the beginning of the loan. Interest is added up for each day you have your loan and we add that month's worth of interest to your balance on your due date. This means that when you're making your repayment, you're paying off some of the balance of your loan, but the rest goes towards paying that month's interest.
You may notice that the amount of interest added each month varies, this is normally due to the number of days in each month going up and down. Your balance at the beginning of the loan won't drop dramatically. Because your balance is high, the interest added will be high but as your loan progresses and you make more payments, the amount of interest added each month will start to drop, and so your repayment each month will go towards paying more of the balance than the interest.
It does mean that if you decide to settle your loan early, you don’t have to pay any extra interest, you just have to pay the balance of the loan (which will already include any interest you have accrued so far).
I hope this helps
Comments (4)
FLM Loans (6 mths ago)
The interest is calculated on a daily balance and applied to the loan. For example, if you wanted to repay the loan early, you only pay interest for the time you've had the loan and the balance of the loan remaining.
ben (6 mths ago)
What is the debit interest that is showing up on my online statement?
FLM Loans (6 mths ago)
The debit interest you are referring to is the amount of interest charged on your loan for that month. It is accrued daily and added on each month on the day your payment is due. It will vary depending on the amount of days in the month and your outstanding balance.
Hope this explains it!
lollysun (6 mths ago)
is the interest front loaded??