How is interest applied on a loan and how do repayments affect the remaining outstanding debt?

Published on: 16 September, 2021

Updated: 15 October, 2021

For all of our loans, we use the Simple Interest formula; we do not institute any compounding effects. We try to keep our platform simple and easy to understand, so Pigeon Loans tends to err on the side of being a more advantageous platform for the Lender of our loans in respect to this question.

For loans created and managed on our platform, any interest is calculated and applied to the entirety of the loan at the beginning of our process. Regardless of the repayment behavior, the Borrower of their respective loan will pay the principal + total calculated interest no matter what the timing or behavior of their repayments.

Ultimately, paying off a loan sooner than negotiated is not advantageous to the Borrower.

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