Interest is calculated daily on the outstanding Principal balance. The daily interest rate is your current rate divided by 365 (or 366 in a leap year). When a payment is made, the amount is applied first to any accrued interest, with the remaining applied to the outstanding balance.
Let's break that down with an example:
Say you borrow $3,075 at 18.88% p.a., with weekly payments of $28.12.
Interest builds up daily. Your daily rate (in a non-leap year) is 18.88% ÷ 365 = 0.05%. Applied to your balance, that's $3,075 × 0.05% = $1.59 per day.
It adds up until your next payment. Over 5 days, $1.59/day adds up to $7.95 in accrued interest.
Your payment pays interest first, then principal. From your $28.12 payment: $7.95 pays off the accrued interest, and the remaining $20.17 comes off your principal — bringing your balance down to $3,054.83.
The cycle repeats — on a smaller balance. Next cycle, interest is worked out on $3,054.83 instead of $3,075, so the daily interest drops slightly to $1.58/day. As your balance shrinks, so does the interest — meaning more of each payment goes toward principal over time.
This is why paying on time (or early) works in your favour: the less time your balance sits before a payment, the less interest accrues.