What is Add on Interest?

When a person takes out a loan then he has the option to choose Add on Interest. The borrower will be in disadvantage when the loan is paid in many steps because he will be paying more. The way this sum is calculated is  enumerating the interest rate of the loan and multiply it by the steps you have to make to fulfill your payment. And that's the total amount of you are paying on each occasion. Now in numbers let's say you borrow £10.000 and for the duration of four years and the interest rate is 10%.

And the loan contract states that your paying in the end of each year, that means you have to make three payments. So the interest is £1000 on each payment you make the money your giving back is £2500+ £1000. In the end you'll pay back £14.000. From these calculation it can be clearly seen that if your applying for loan which has more then one steps of repayments then it's disadvantageous to choose it.