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Simple interest is money which is paid for the use of the principal (the sum lent), at a certain rate.

Simple Interest Explained

Simple interest is calculated on the principal portion of a loan, savings or investment, not on previously earned interest.

With savings, simple interest does not compound which means you only gain interest from the principal.

With loans, a borrower will never have to pay interest on interest already accrued. Unpaid interest does not compound to the principal amount and will not impact total interest paid.

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