add-on interest. finance charges computed by adding the interest payable to the full amount of loan principal. The add-on interest is added to the original principal amount, and becomes a part of the face amount of the promissory note. Computing interest due under the add-on interest method is fairly simple. The loan principal is divided into a number of fixed payments, and each payment is multiplied by the finance charge, to calculate the interest cost to the borrower: Add-On Interest = Principal Ã Rate Ã Number of Months in the loan/12.