It is important to understand that Loans and Revenue Loans are amortising loans. Amortisation refers to the maths behind how a repayment is calculated and consists of both interest and the initial capital you lent.
Based on the amount of the loan, the interest rate, and the term of the loan, you will be able to determine how much you’ll get paid each month and how much total interest you’ll earn.
How amortisation works
While the amount of each monthly payment is identical, the interest component of each payment will decrease each month and the principal component of each payment will increase until the end of the loan. Here is a breakdown of a £5,000 loan over 5 years at 9% APR.
Calculate the repayments for your loanUse this calculator to understand amortising repayments
We offer 3 lending products, allowing investors to choose the level of risk to suit you. Repayments are made on a monthly basis by businesses directly into your wallet and you can see the detail of each repayment from the repayments table in your wallet.
A loan is an amotising fixed repayment loan where each repayment is made on a monthly basis and consists of both interest and principle.
A revenue loan is a flexible loan where the repayment is flexible as its calculated from the turnover of the business that month. The repayment is amortising as it consists of both interest and principle.
A bond is not an amortising loan and is interest only. The capital is repaid at the end of the term in a bullet repayment.
When you receive a repayment consisting of both interest and capital, some of the initial capital you lent is repaid and therefore you are not earning interest on the repaid capital. If you want to maximise the amount of interest you are earning it's important to re-invest the repayment into another opportunity.