First, let’s clarify something: we’re not talking about Kabbage interest rates here, but rather fees. Kabbage doesn’t charge interest on its line of credit. Instead, you pay pre-determined fees on each draw.
We should preface this section by telling you straight-up that Kabbage has a, well, unusual approach to fees and repayment. In fact, much customer criticism of Kabbage comes from people who didn’t understand their repayment schedules.
Let’s spare you that frustration by breaking this down.
As we previously said, Kabbage requires monthly payments, which it automatically withdraws from your account. If you have a six-month term, you make six payments; if you have a 12-month term, you make 12 payments. Those monthly payments include payments on the principal (your Kabbage business loan amount) as well as fee payments.
Your principal payments stay the same every month—just take the total loan amount and divide it by the months in your term, and you have your principal payment. So if you borrow $10,000 over six months, just divide $10,000 by six to get your monthly principal payment of $1,667.
Your fee payments, however, change over your term. Initially, you’ll pay a fee between 1.5% and 10.0% of the total loan amount. After a few months, those fee payments drop to 1.0% of your total loan. For six-month terms, these lower payments start in month three; for 12-month terms, they start in month seven.
Add your monthly principal payment to your monthly fee payment to get your total monthly payment. Again, this payment will decrease mid-way through your term.
For example, let’s say we withdraw $10,000, and we have a fee of 3.0%. Here’s how that fee schedule would look for a six-month term: