Financial Definition of SIMPLE INTEREST
What It Is
How It Works
Why It Matters
Simple interest is a handy, easy tool for estimating the interest earned or paid on a certain balance in one period. However, it does not take into account the effects of compounding, which is the process of earning interest on principal plus interest that was earned earlier. This means it can dramatically understate the amount of interest earned or paid over time.
SIMPLE INTEREST Defined for English Language Learners
Definition of simple interest for English Language Learners
finance : interest paid only on the original amount of money and not on the interest it has already earned
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