Guide to Precomputed Interest Loans

Share this article:
Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent, and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or network providers. Read more about our Editorial Guidelines and How We Make Money.
What Is Precomputed Interest?
How Does a Precomputed Loan Work?
Precomputed Loan vs Simple Interest Loan
Is Precomputed Interest Legal?
How Do You Know If Your Loan Has Precomputed Interest?
Calculating Precomputed Loans
Precomputed Interest Formula
Precomputed Interest Example
Paying Off a Precomputed Interest Loan Early
Types of Personal Loans
Unsecured personal loan: Also called a no collateral loan, an unsecured personal loan does not require any collateral to secure it. That means any assets the borrower has in their name are not at risk if they default on the loan. Secured personal loan: A secured personal loan requires collateral to back it. The benefit of collateralized loans is that they often come with lower interest rates than unsecured personal loans. Variable rate loan: When index rates change, so do the interest rates on variable rate loans. These loans help borrowers save money if and when rates drop. Fixed rate loan: A fixed rate loan comes with an interest rate that is set and doesn’t change. Fixed rate loans can make budgeting easier because the monthly payments are always the same. They also protect borrowers from rising interest rates. Personal loan with a cosigner: With this type of loan, a cosigner on the loan agrees to continue the payments should the primary borrower be unable to do so.
The Takeaway
Frequently Asked Questions
Photo credit: iStock/hallojulie
LNTPL-Q324-007
About the Author
Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.
Share this article: