2 min read
Definition
Simple interest is calculated as principal × rate × time, on the original sum alone. Borrow £10,000 at 8% simple for three years and you pay £800 a year, £2,400 in total — no interest on interest. It contrasts with compound interest, which charges interest on the growing balance.
In plain terms
It is the gentler of the two: the interest never breeds more interest, so the cost stays predictable and linear.
Why it matters for your company
Simple interest is cheaper than compound at the same rate — know which applies to your facility. See compound interest and compare with the compound interest calculator.
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Read →Funding for UK limited companies
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