Simple Interest


Simple interest is considered as the quickest and the most reliable methods of evaluating the interest rate that financial centers and banks would apply on the borrowed amount. It is universally determined by multiplying the percentage of the interest rate by the loaned amount and then by number of periods.

It is being used in all over the world, where banks and finance centers would implement different amounts of interest rate to embark on short and long-term loan programs.

The simple interest is evaluated through – Simple Interest = P x I x N

The Fact:

According to accounting gurus and experts, the main difference between a standard mortgage and simple interest mortgage is the phenomenon of calculating interest from the first month and daily on the second. The simple interest pushes the customers to pay more money at the end of the month if we don’t round off the funds in due date.


Assume that a person has received $100,000 to be paid back in 30 years with a rate of 6 %. Let’s find out how simple interest is going to give us rational explanation here.
Through simple interest, we’re going to divide the annual rate with the total number of days in a year, which will give us an amount of .01638 %. Furthermore, daily rate is evaluated by multiplying it with the loan balance. It leads us to an amount which indicates the interest rate that we must pay on a regular basis.