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Definition of Add-on Interest
- Interest that is calculated at the beginning of the loan and added to the principal amount owing. This means that the added interest must also be repaid, even if the loan is paid off early.
Related Terms and Acronyms
- Interest (int, IN) — Bank,
➥ Bank account transaction code.
- Money paid for the use of borrowed funds, usually expressed as an annual percentage.
- Penalty — Bank,
- In mortgage terms, a penalty is a set rate or length of time the penalty will be charged based on the remaining loan amount. The penalty is usually three months interest or interest rate differential.
- Principal — Bank,
- The original balance of money lent on an outstanding loan and fees, excluding interest. Also the remaining balance of a loan, excluding interest.
- Compound Interest — Bank,
- Interest that is calculated by adding the interest earned in the current period to the principal and figuring the next period's interest on this "compounded" total amount.