Understanding interest on your Fig loan

Modified on Thu, 27 Apr 2023 at 10:41 AM

Understanding how interest is calculated is very important to understanding your Fig loan payments being applied to your balance. Interest is the cost of borrowing money, and it is calculated as a percentage of the loan amount. The annual interest rate is calculated daily, but it is important to note that interest is charged starting from the day the loan is booked, even if you haven't received your disbursement yet.

Understanding Simple Interest

To make your Fig loan work best for you, we charge simple interest to make sure that your payments will stay the same for the full term of your loan! For example, if you have a loan with an interest rate of 15% per year and a principal balance of $1,000, your simple interest for one year would be $150 (15% of $1,000).

Daily Interest Calculation

The interest on your Fig loan is usually calculated on a daily basis. This means that interest is charged every day based on the outstanding balance of your loan, starting on the day your loan is approved. Interest is calculated by multiplying the outstanding balance by the daily interest rate. The daily interest rate is calculated by dividing the annual interest rate by 365 (the number of days in a year).

Paying Off Your Loan

Any payments made on your Fig loan will first cover any interest that has accrued since your last payment. Any remaining after paying the interest is applied to the principal balance of the loan. Every payment you make reduces the principal, meaning your next payment should have less and less interest being covered, and more principal as time goes on.

Early repayment, or one-time lump sum payments are applied in the same way, any interest owing up til the time you are making the payment will be covered first, and the full remainder to the principal. Your Fig loan repayment amount will stay the same, however, since there is a smaller principal balance, the term will be shortened. We do not charge any fees for any early repayment of your Fig loan, and repayment can be made at any time through the self service portal!

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