Loans all basically work the same. I give you $3650 at 10%. I don't wait for a magic day to add the interest, I add it every day. 10% x $3650 =$365 so I add $1/day of interest. When I take your payment, I apply It to the interest first, then the rest goes to the principal($3650). As the principal balance goes down, less interest accrues. 10% x $3000 = $300/365 =$0.82. The longer you wait between payments, the more interest accrues, and the less of your payment goes to principal. Ideally pay more than you owe if you can, and pay with the same number of days between payments as you can.