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How is interest charged on my loan?

The total amount of your loan includes both your loan capital and the total amount of interest charged for a loan of that size until the end of your chosen loan term. The interest payable over the term is calculated by applying the agreed interest rate to the loan capital on the basis that you will be paying back part of the loan capital each month over your chosen term. The interest across the duration of your loan is debited from your loan amount at the start of the loan.

Although your repayment amount is fixed for the duration of your loan, the way that we allocate each monthly payment between the loan capital and the interest varies throughout the term. At the start of the loan, a higher proportion of your monthly repayment is allocated to repaying interest. However, as you start to make more repayments, we allocate less of the monthly repayments to repaying interest and more towards reducing the capital until your loan is completely repaid.