Question

Which best describes the difference between simple and compound interest

Answer 1

Simple interest is calculated based solely on a percentage of the loaned amount, while compound interest is calculated based on a percentage of the loaned amount and interest. ... Since there is no charge for any interest outstanding, it is less expensive for the borrower to pay off a simple interest loan. Principal.

Answer 2

While both types of interest will grow your money over time, there is a big difference between the two. Specifically, simple interest is only paid on principal, while compound interest is paid on the principal plus all of the interest that has previously been earned.