For small business owners, understanding repayment terms before applying for a loan is critical. For instance, most lenders offer pre-computed interest rates, which means they calculate the interest payment for the entire length of the loan and add it to the principle when the loan is issued. And yes, this does provide a clear picture of exactly how much interest is charged. But, what happens if the borrower pays off the loan early, expecting to save the interest they would have accrued?
In reality, most lenders will still require borrowers to pay the full amount of interest, even if the loan is paid off early.
At IOU Financial, we offer a different approach that actually rewards our borrowers for early loan payoff. Unlike most other lenders, our simple interest process calculates the interest due by the loan’s principle balance that is outstanding each day. Therefore, as the loan amount decreases, so does the interest payment. It’s that simple!
To help small business owners plan out their loan repayment, and as a result, save money, IOU Financial has created a new loan savings calculator that provides a complete picture of the total cost of a loan, as well as options for paying it back in the most cost-effective time frame possible.