Simple interest is a simple and easy method of calculating the interest charge on a loan. Simple interest is determined by multiplying the daily interest rate by the principal by the number of days that elapse between payments. In simple words, Simple interest represents a fee that you pay on a loan or income that you earn on deposits.
When you make a payment on a simple interest loan, the payment first goes toward that mont’s interest, and the rest of it goes toward the principal. Every month’s interest is paid in full. In comparison, compound interest adds some of the monthly interest back onto the loan, in each succeeding month, you pay new interest in old interest.
Simple interest is determined by multiplying the daily interest rate by the principal by the number of days that elapse between payments. This type of interest usually applies to short term loans, and this type of method is used to calculate it. Simple Interest Formula is written as:
Simple Interest= PxIxN
Where P amount of loan.
I is the daily interest rate.
And N is the duration of the loan
By using this formula. you can easily determine the Interest of anything. This formula makes it easier and simpler to determine the interest rate on a daily basis.