The interest rate on a credit loan — for instance, a home mortgage, personal loan or car loan — is the cost required by a lender to lend out the money. When assessing your loan options, ascertain whether the rate is compounded interest or simple interest. Compounded interest includes any interest accrued to the principal. Simple interest is based only on the remaining amount of the principal not yet paid. Both are acceptable practices; however, loans with compounded interest can be more costly. Hence, make sure you know what you will be paying when you sign any agreement. The Cathford Group Credit Inc. only applies simple interest to personal loans. At The Cathford Group Credit Inc., we commit to provide a simple and clear fee structure. So, the only fee you will ever get to pay the company is the daily simple interest applied on your loan.
Interest computed only on the principal and (unlike compound interest) not on principal plus interest earned or incurred in the previous period(s). Simple interest is used commonly in variable rate consumer lending and in mortgage loans where a borrower pays interest only on funds used. Formula: Principal amount x Annual interest rate x Number of years.