The interest rate figured on the full principal of the loan with the sum of interest and principal payments divided by the number of payments to determine the dollar amount of each payment is the:

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The add-on rate method involves calculating interest on the full principal amount of a loan, then adding this interest to the principal and dividing the total by the number of payments to determine each payment amount. This method does not reduce the principal on which future interest payments are calculated as payments are made, unlike methods that involve amortization.

The Interest Rate Figured on the Full Principal of the Loan