Simple interest is calculated only on the original principal amount. It doesn't compound, so you earn the same amount of interest every period.
Simple Interest = Principal × Rate × Time. For example, $10,000 at 5% for 3 years = $1,500 in interest.
Simple interest is commonly used for short-term loans, car loans, and some savings accounts. Most mortgages and credit cards use compound interest instead.
Simple interest is calculated on the principal only. Compound interest is calculated on the principal plus previously earned interest, so it grows faster over time.
