Simple interest: Under the simple interest method

Under the simple interest method, interest is charged/earned only on the principal amount and there is no interest on interest . Learn What is meant by Simple Interest , How to Calculate Simple Interest on your loan. Refer to Solved Examples finding different parameters in SI Formula. Simple Interest (SI) is the interest calculated only on the original principal for a specific period of time. Compound Interest (CI) is calculated on the principal and also on the accumulated interest from previous periods. Simple interest (SI) refers to the percentage of interest charged or yielded on the principal sum for a specific period. Borrowed funds (loans), investments, and deposits are considered the principal sum. Calculating Simple Interest is easier than calculating compound interest . Also, the amount of interest remains the same through consecutive periods of borrowing or deposit. SI is the fee borrowers pay lenders.