simple interest

Popular Terms
Interest computed only on the principal and (unlike compound interest) not on principal plus interest earned or incurred in the previous period(s). Simple interest is used commonly in variable rate consumer lending and in mortgage loans where a borrower pays interest only on funds used. Formula: Principal amount x Annual interest rate x Number of years.

Use 'simple interest' in a Sentence

I was fortunate to have a home loan using simple interest so I could not have asked for a better deal.
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If you want to minimize interest payments on a loan, you'll need one that has a simple interest rate so that your interest doesn't compound itself.
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John opened an account, and knew exactly how much it would be worth at the end of the year, because it used simple interest that would not compound over the year.
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