1. What is Simple Interest?

Simple interest is a method of calculating the interest charge on a loan based on the original principal amount. Unlike compound interest, simple interest doesn't accumulate on previous interest payments.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( P \) — Principal amount (GBP)
• \( r \) — Annual interest rate (decimal)
• \( t \) — Time period in years

Explanation: The formula calculates the total interest by multiplying the principal amount by the annual interest rate and the time period in years.

3. Importance of Interest Calculation

Details: Understanding interest calculations helps borrowers evaluate loan costs and compare different loan options effectively.

4. Using the Calculator

Tips: Enter principal amount in GBP, annual interest rate as a decimal (e.g., 5% = 0.05), and time period in years. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between simple and compound interest?
A: Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus any accumulated interest.

Q2: Is this calculator suitable for mortgages?
A: No, most UK mortgages use compound interest. This calculator is for simple interest loans only.

Q3: How do I convert APR to decimal?
A: Divide the percentage by 100 (e.g., 7.5% APR = 0.075 decimal).

Q4: Can I use this for partial years?
A: Yes, enter fractional years (e.g., 6 months = 0.5 years).

Q5: Does this include UK tax implications?
A: No, this calculates gross interest before any tax deductions.