What is a Simple Interest Loan?

Person using a calculator to calculate interest payment

A simple interest loan is not compounded, which means that the interest is calculated upon the remaining principal balance. In other words, you pay a set monthly amount plus interest based upon the original loan sum. An important benefit of a simple loan is that anytime you are able to pay more than the set amount, it will lower how much you’ll be required to pay going forward. Learn more about simple interest loans from the experts at Butler Auto Group.



How is a Simple Interest Loan Calculated?

To calculate the interest on a simple interest loan, you multiply the principal times the rate times how many months are in the loan term. For example, if you secure a loan for $10,000 with an interest rate of 6% and a term length of 12 months, your first monthly payment will be $250, with $50 going to pay interest and $200 to pay down the principal. For the next monthly payment, $49 will go to interest, with $201 going towards the principal, and so forth. To make it easy for you, we offer a convenient online payment calculator.


What Are the Benefits of a Simple Interest Loan?

Most car loans are simple interest loans, which is a good thing. In a pre-computed loan, the interest is determined up front and the rate is fixed over the length of the loan. With a simple interest loan, you only pay interest on the remaining principal balance of the loan. Another benefit of a simple interest loan is that by making early or additional payments you can reduce the principal balance, as well as the total cost of interest paid over the length of the loan.


What Happens If I Miss a Payment?

Not being compounded, you will be hit with late fees if you miss a payment on your simple interest loan. The late fees can accumulate over time and you will be required to pay them all in full by the end of the loan term before the lender will release the car title to you. Make sure to read your contract carefully to find out exactly what the late fees are and how they will be applied if you can’t make your monthly payments on time.


Get Flexible Financing at Butler Auto Group

Find out what to bring with you when buying a car, and learn about the difference between buying vs. leasing, then browse our new vehicle specials to find the best deals available. After you’ve chosen a model, we’ll help you learn about your insurance coverage requirements and other options.

The finance specialists at the Butler Auto Group dealership near you are always happy to help you get the financing you need, no matter if you have bad credit or no credit. If you have any questions, want to find out how to improve your credit score, or would like to learn more about the Butler Benefit, please feel free to contact us.

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Acura of Columbus

(706) 576 – 6700
6549 Whittlesey Boulevard, Columbus, GA 31909
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BMW of Columbus

(706) 596-2888
6549 Whittlesey Blvd, Columbus, GA 31909
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BMW of Macon

(877) 739-3755
4785 Riverside Dr, Macon, GA 31210
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Butler Ford

(478) 607-2596
2631 N Columbia St, Milledgeville, GA 31061
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Thomasville Ford

(229) 520-5493
1515 E Jackson St, Thomasville, GA 31792
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Butler Honda

(478) 414-2129
2631 N Columbia St, Milledgeville, GA 31061
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Butler Lexus

(478) 477-0700
4550 Riverside Dr, Macon, GA 31210
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Butler Toyota

855-594-8600
4580 Riverside Dr, Macon, GA 31210
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BUTLER CDJR

1555 Salem Rd, Beaufort, SC 29902, United States
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Valdosta Toyota

(229) 269-4877
2980 James Rd, Valdosta, GA 31601
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Butler Nissan of Macon

(478) 781-8440
4500 Riverside Dr, Macon, GA 31210
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Audi South Atlanta

(678) 783-2834
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Thomasville Lincoln

(229) 379-3192
1515 E Jackson St, Thomasville, GA 31792
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Butler Chevrolet

(478) 225-4414
2020 Riverside Drive, Macon, GA 31204, USA
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Butler Lexus of South Atlanta

4025 Jonesboro Rd, Union City, GA 30291, United States
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Butler Auto Group
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