Loan: What’s the deal with Do Earnest Loans?


Learn about loan payments, interest, and paying back the loan.

When you get a loan, you must pay back the borrowed amount plus interest within a specific time. This is usually paid back over the life of your loan, which could be three years or thirty.
Before you sign the agreement for your new loan, it’s a good idea to know how your payments will pay off the loan over time. Take a look.

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How can I get a loan?

A loan is an agreement between a lender and a borrower that the borrower will get money from the lender and pay it back, plus interest, over a certain amount of time. The lender gives you a contract that spells out the terms of each loan. Secured loans are loans where the borrower can use an asset as collateral, like a house. This makes the lender feel better about the loan. Unsecured loans are loans that are given out without collateral, which means that the lender is taking on more risk.

How does the history of your credit affect your interest rate?

Before you can get a loan, secured or not, you have to fill out an application. First, banks and other financial institutions will do a soft credit pull to ensure you meet the minimum requirements to apply. If you move forward with an application, the lender will do a hard credit check to look at your credit history.

Suppose you want to look at your credit history. In that case, you can ask for a credit report from one of the three major credit agencies: Experian, Transunion, or Equifax. You can ask each lender for a free account once a year to see what they will look at.

How much interest you pay will depend on how good of a credit risk you are. If you have a good credit score, the lender will be more confident that you will pay back the loan and may be willing to give you a lower interest rate or more money. If your credit score is down, you might want to build it up before applying for a loan to get a better offer.

How do you figure out interest?

The interest rate is the amount the borrower has to pay on top of the loan’s principal. Think of it as the fee you spend using the lender’s money. Just like there are many different kinds of loans, there are also many different kinds of interest rates:


For the most uncomplicated rates, all you have to do to determine the interest due is multiply the principal by the speed at each payment time. For example, if you borrowed $2,000 from a family member and they wanted you to pay them back in a year with 5% interest, you would owe them $2100 at the end of the year.


Compound rates are standard for credit cards and savings accounts. They charge interest on both the principal and the interest already earned. For example, if you borrow $2,000 for a year at a rate of 5%, you will have to pay $100 in interest in the first year. In the second year, you would owe $2,205 because you would have to pay 5% interest on $2,100, which would bring the total to $2,205.


At the beginning of the loan, the borrower pays more interest than the principal. Over time, the principal amount in each payment will go up, reducing the principal and the amount of interest charged. Even though the costs are always the same, the money goes toward different things (principal or interest) over the life of the loan. Loans that are paid off over time are called amortized loans. These are often used for loans for cars or homes.


A fixed interest rate will be set up and won’t change during the loan’s term. This makes it easier to plan a budget for payments.


Rates variable rates called “adjustable”) change over the life of the loan based on how the market interest rate changes. Your loan’s interest rate could go down or up throughout the loan.

How does paying back a loan work?

Loans are paid back in set amounts over the loan’s term. Say you pay on your car loan every month. Each payment will cover some of the interest and some of the principal. The principal you pay off with each payment depends on how much you can put toward it. You can save money on interest payments if you pay down your loan’s principal and pay it off quickly.

How do loan payments change over time?

As the loan’s principal gets paid off, less interest is added. This means that over time, less and less of your monthly payment will go toward paying the interest, and more will pay off the principal. This is easiest to see with loans that change slowly over a longer time, like 15- or 30-year loans.

What kinds of loans does Earnest have?

Student Loan Refinancing- Student loan refinancing is a way for people who took out loans to pay for school to change the interest rate on those loans. This is a good option for people whose income, career, or credit score has increased since school. This new rate is more in line with their current financial situation.

Private Student Loans- If you are a student in school who wants to get a private loan to pay for your education, you don’t need to look any further. We made an easy-to-use application that teaches both the borrower and the cosigner as they go through this step.

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