1. What is Simple Interest?

Simple interest is a method of calculating interest where the interest is computed only on the original principal amount throughout the loan term. It doesn't compound over time.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( Loan\ Amount \) — Original principal amount in USD
• \( Rate \) — Annual interest rate in decimal form
• \( Term \) — Loan duration in years

Explanation: The formula calculates the total interest payable over the loan term by multiplying the principal by the rate and time.

3. Importance of Interest Calculation

Details: Understanding simple interest helps borrowers estimate loan costs and compare different loan options. It's commonly used for short-term loans and some types of personal loans.

4. Using the Calculator

Tips: Enter loan amount in USD, rate as a decimal (e.g., 0.05 for 5%), and term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal, while compound interest is calculated on principal plus accumulated interest.

Q2: When is simple interest typically used?
A: It's often used for car loans, short-term personal loans, and some types of mortgages.

Q3: How do I convert APR to decimal?
A: Divide the percentage by 100 (e.g., 5% = 0.05).

Q4: Does this calculator account for payments?
A: No, this calculates total interest only. Payment schedules would require additional calculations.

Q5: Can I use this for partial years?
A: Yes, enter fractional years (e.g., 1.5 for 1 year 6 months).