 TITLE: What Is a Precomputed Interest Loan? CONTENT: Most loans use simple interest to determine the cost of borrowing. A simple interest arrangement puts a portion of each monthly payment you make toward the interest accrued since your last payment, with the remainder paying down your principal balance.\nWith a precomputed interest loan, however, the lender calculates how much you'd pay in interest over the life of the loan if you were just to pay the minimum amount due every month. It then adds that interest to your principal balance and you make your monthly payments as usual.\nPrecomputed interest loans aren't as common as simple interest loans, but this type of interest is used on some personal loans and auto loans, particularly with auto lenders that specialize in working with borrowers who have poor credit. END