Loan Interest Definition

If you’ve been exploring Minute Loan Center’s loan products, you’ve come across the term ‘interest’ with every loan offer. So, what is interest? The simple definition is the cost of the loan. Essentially, what interest on a loan means is that you’re paying to have the lender entrust to you a certain amount of money for a specified number of weeks, months, or years. Therefore, when you repay the loan, you’ll pay back the principal amount given to you, along with the interest the loan accrued.

Interest is typically a dollar amount, but is expressed as a percentage of the principal you’re borrowing. It’s calculated monthly. The higher the rate, the more expensive the loan is, and vice versa.

Minute Loan Center’s Loan Interest Defined

Affordable Loans with Predictable Payments

At Minute Loan Center, we regard our loan interest rates as fair and competitive. Our loans are designed to be affordable, which has made them a popular choice among customers in the communities we serve. We offer a fixed interest rate that keeps the payments predictable, so that you can plan and budget for your installments in advance.

Additionally, we use a simple interest rate calculation. What simple interest on a loan means is that we calculate the interest only on the original loan amount – not on interest amounts. The latter type of loan interest is defined as "compound interest”, where interest is calculated on the original loan amount, plus any interest accumulated from previous periods. As a result, our customers pay less in interest compared to compound interest offerings from the competition.

Factors Influencing Your Loan Interest Rate

Keep in mind, however, that the interest you pay will depend on individual factors of your loan application including your creditworthiness, the amount borrowed, and the length of the loan term. Although we do not consider your traditional credit scores, we do look at your financial history to determine your capacity to service additional debt. We also look at your income flow and the debts you’re currently servicing to assess your capacity to carry additional debt.

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Is Interest the Same as APR?

No. Right from the definition, the interest on a loan is not the same as the annual percentage rate (APR), although it’s often perceived to be so. What the interest on a loan means is that it’s only inclusive of the amount a borrower pays for borrowing the principal amount. However, APR is the total annual cost of borrowing.

APR includes interest, plus other loan-related expenses, such as one-time fees, closing costs, and others. These fees are calculated on an annual basis. Therefore, while both interest and APR refer to the costs of a loan, the definition of loan interest is the amount to pay each month, whereas APR refers to the total cost on an annual basis, over the life of the loan.

Choose Wisely

As you compare loan offers, use APR because it’s more comprehensive and shows the total cost of taking up the loan. If you simply go with the loan interest, you’ll be surprised because some lenders charge very high separate fees that may even surpass the interest rate.

At Minute Loan Center, we present you with the total cost of the loan and let you decide. We have some of the most competitive rates, and we are honored to extend our loan products to you.

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