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Add-On Interest Loan Calculator

Enter loan amount, add-on rate and term to see total cost and monthly payment.

Result

$12,400.00
$2,400.00
$344.44

How it is calculated

Interest is charged once on the original amount for the whole term: interest = principal × rate ÷ 100 × years, total cost = principal + interest and monthly payment = total cost ÷ (years × 12). The principal is in dollars, the rate is the stated add-on percentage per year and the term is in years, so 6 months is entered as 0.5. Principal and years must be above zero. The monthly figure is just the total split evenly, with no compounding and no fees. Because the balance falls with each payment but interest does not, the true annual cost is higher than the stated rate. Rules on how add-on loans may be advertised differ by country.

Worked example

Borrow 10,000 at an 8% add-on rate for 3 years. Interest: 10,000 × 0.08 × 3 = $2,400.00. Total cost: 10,000 + 2,400 = $12,400.00. Number of payments: 3 × 12 = 36, so each is 12,400 ÷ 36 = $344.44. Worked out separately as a normal declining-balance loan, these payments equal an interest rate of about 14.5% a year, not 8%.

Try this example →

Common mistakes

  • Treating the add-on rate as the APR. Interest here never shrinks as you pay down the balance, so 8% add-on costs far more than an 8% amortizing loan.
  • Entering the term in months. The field is years, so 36 months must be typed as 3; typing 36 gives interest for 36 years.
  • Typing the rate as a decimal. Enter 8 for 8%, not 0.08.
  • Expecting early repayment to save interest. In this structure the interest is fixed upfront, so check the contract for how a payoff is treated.
  • Leaving out fees and insurance. They are not included, so the total cost here is a minimum.

Sources

About this calculator

An add-on interest loan calculates interest on the full original principal for the entire loan term, then adds it to the principal upfront: Total Interest = Principal × Rate × Term (in years), and the resulting Principal + Interest is simply divided by the number of payments to get the monthly installment. Unlike a standard amortizing loan, the interest doesn't shrink as the balance is paid down — you're charged as if you owed the full amount the whole time, even in the final month when you actually owe very little.

Because of this, the effective APR of an add-on loan is roughly double its stated add-on rate — an 8% add-on rate on a loan repaid in equal installments behaves like a ~14–15% APR amortizing loan. This structure is still common in short-term consumer financing, retail installment contracts, and some auto/furniture financing, so borrowers comparing loan offers and consumer-finance regulators use this calculator to convert an advertised add-on rate into its true total cost before signing.

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Comments (1)

  • Editorial team

    The tool shows the add-on cost but not the declining-balance rate behind it, which is the figure to put next to other offers. Worked out separately, the default 6% add-on rate over 3 years gives payments of 327.78 for 36 months, and those payments equal an ordinary loan at about 11.1% a year. Ask any lender to state the APR too. Have you been quoted an add-on rate that you want to compare with a bank loan?

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