“A fixed amount paid by the borrower to the lender over a set period of time. Simple interest is calculated only on the principal amount of a loan using this formula: Simple interest = principal x interest rate x term of the loan
To give an example, if one borrows EUR 1,000 over a period of 12 months, for which the bank charges 5% annual simple interest. After one year, the outstand balance would be EUR 1,050. Most banks move simple interest in line with the Bank’s Base Rate.
