How to Calculate and Understand Simple Interest


simple interest

simple interestSimple interest is a method of quickly calculating the interest charges on a loan. It ignores the effect of compound interest as the interest rate will always be based solely on the principal amount of the loan.

It’s especially useful to calculate simple interest when dealing with short-term loans.

Simple Interest is calculated with the following formula:
(Interest) = (Principal * Rate * Time) / 100

Use the simple interest calculator below to estimate the interest on that next car loan.

When calculating long-term loans such as mortgage interest, you’ll want to calculate compound interest.

Compound interest differs from simple interest in that it charges additional interest on the total amount due, at the end of a designated period, on both the orginal interest and earned interest.

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