Prodigy Finance's interest rate uses the simple interest formula, meaning that the interest rate does not compound throughout the life of the loan*. The interest rate is variable, and is made up of two components:
- a fixed margin, determined by Prodigy Finance
- a variable base rate, we use 3-month LIBOR as the base rate.
In addition to the interest rate, there is an admin fee for each loan we issue. The maximum admin fee is 5% of the total loan amount. This fee is added to your loan amount when the loan is issued and spread across your monthly payments- you're never required to pay this fee upfront.
For example, if you take a loan for USD 40,000, the maximum admin fee will be USD 2,000. The USD 40,000 will be sent to your school and the USD 2,000. will be added to your loan when calculating your opening balance. Once your repayment period begins, the interest accumulated during your grace period is added to your balance, and any new interest is then calculated on this new balance.
*With simple interest loans, the interest charged during grace is capitalized once when you enter repayment. This means that the total amount of interest accrued while studying and during your grace period is added to the original loan amount to create a new principal amount on your first repayment date. To find out more, click here