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simple interest
Definition of simple interest
: interest paid or computed on the original principal only of a loan or on the amount of an account
First Known Use of simple interest
1798
Financial Definition of SIMPLE INTEREST
simple interest
What It Is
How It Works
For example, let’s assume that John Doe puts $1,000 in his savings account. The bank pays 3% per year in interest. Using this information and the formula above, we can calculate how much interest he will earn in a year:
Simple Interest = 0.03 x $1,000 = $30
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
simple interest
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
Law Dictionary
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