1. What is Simple Interest?

Simple interest is a method of calculating interest where the interest is only calculated on the original principal amount throughout the loan term. It's commonly used for short-term loans in the UK.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Principal loan amount (£)
• \( Rate \) — Annual interest rate (%)
• \( Time \) — Loan period in years

Explanation: The formula calculates the flat interest charged on a loan over time without compounding.

3. Importance of Interest Calculation

Details: Understanding loan interest helps borrowers compare different loan offers, plan repayments, and assess the true cost of borrowing.

4. Using the Calculator

Tips: Enter the loan amount in pounds, interest rate as a percentage, and loan term in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: Is this calculator for simple or compound interest?
A: This calculates simple interest only. For compound interest, you would need a different calculator.

Q2: Are UK personal loans typically simple interest?
A: Most UK personal loans use simple interest, but mortgages and some other loans may use compound interest.

Q3: Does this include any fees or charges?
A: No, this only calculates the interest portion. Always check for additional fees with your lender.

Q4: Can I use this for part-year calculations?
A: Yes, you can enter fractional years (e.g., 1.5 for 1 year 6 months).

Q5: How accurate is this for variable rate loans?
A: This assumes a fixed interest rate. For variable rates, you would need to calculate each period separately.