How to Calculate Simple Interest

AN EASY GUIDE TO UNDERSTANDING INTEREST! Learn #howto calculate simple interest on your own so that you can go into your next loan -- whether you're the borrower or the lender -- totally prepared.

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When you borrow money, you pay interest to the lender. Interest may be computed as simple interest, which is calculated by multiplying the amount of money borrowed by the interest rate and the length of the loan.

The mathematical equation for calculating simple interest is {Interest = Principal x Interest Rate x Time}.

However, banks typically charge compound interest on loans. To compound interest, you add the interest to the principal each year of the loan. The following year, interest is paid on the total amount of principal and interest. It's most common to see interest that is compounded each year, but interest may also be compounded monthly, or even weekly or daily.

You can also earn interest (either simple or compound) on investments you make.

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Read more: wikihow.com/Calculate-Simple-Interest

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