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TeachMeFinance.com - explain simple interest simple interest -- Interest paid only on the principal of a loan. No interest is paid on interest accrued during the term of the loan. another definition... simple interest -- interest that is calculated on the outstanding principal balance and not on any interest previously earned. See compound interest. compound interest -- the interest that accrues when earnings for each specified period of time are added to the principal, thus increasing the principal base on which subsequent interest is computed. See simple interest. historic definition... Simple interest -- Interest computed on the principal alone and not added to the principal to bear interest also as is the case in compound interest. About the author Mark McCracken Author: Mark McCracken is a corporate trainer and author living in Higashi Osaka, Japan. He is the author of thousands of online articles as well as the Business English textbook, "25 Business Skills in English". Copyright © 2005 by Mark McCracken, All Rights Reserved. TeachMeFinance.com is an informational website, and should not be used as a substitute for professional financial or legal advice. TeachMeFinance.com and its owner recommend consultation with a professional financial advisor prior to any investment or financial decision. Please read our disclaimer.