Learn how add-on interest increases loan costs compared to simple interest. Discover the formula, examples, and its implications for borrowers.

What is an Add-On Interest? Interest that is calculated during the creation of a loan; borrowers will pay a set amount of interest each month without a decrease in amount for the life of the loan.

Experts at Carleton acknowledged calculating add-on interest isn’t as prevalent as it once was with finance companies and other lenders using simple-interest calculations more often nowadays. However, ...