GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
 
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62% - Often

Simple Interest


Synonyms:non-compound interest, plain interest, straight interest
Acronyms &
abbreviations:
SI
Filed Under: financial-banking
Tags: finance, rates
 

Definition of simple interest (SI)

simple interest (SI)
1. Interest that is calculated only on the principal balance, without compounding.

Related Terms and Acronyms:

  • accrue   To gather together an amount often over a period of time.
  • amortization   Amortization refers to the process of gradually paying down the principal of a loan. Each payment toward the principal reduces your loan by that amount. This is different than an interest-only loan payment where the principal balance is never reduced. Amortization for a mortgage loan in Canada is normally 25 years, but can be as few as 5 years.
  • annual percentage rate (APR)   A yearly rate of interest that includes fees and costs paid to acquire the loan. Lenders are required by law to disclose the APR. The rate is calculated in a standard way, taking the average compound interest rate over the term of the loan, so borrowers can compare loans. In mortgages, it is the interest rate of a mortgage when taking into account the interest, mortgage insurance, and certain closing costs including points paid at closing. There is no APR in an automobile lease; instead, the cost of money is expressed as the money factor.
      ➥  A number used to compare costs associated with mortgage loans and other forms of financing.
  • annual percentage yield (APY)   The percentage, required by Truth in Savings regulations, to be disclosed on interest-bearing deposit accounts that reflects the total interest to be earned based on an institution's compounding method, assuming funds remain in the account for a 365-day year.
  • compound interest   Interest that is calculated by adding the interest earned in the current period to the principal and figuring the next period's interest on this "compounded" total amount.
  • compounding method   Used in Bank rate tables. These include: S--Simple interest. A--Compounded annually. H--Compounded semi-annually. Q--Compounded quarterly. M--Compounded monthly. D--Compounded daily.
  • interest rate (IR)   The rate a lender charges an individual to borrow money.
  • level payment   A method of repayment where periodical payments of principal and interest are made in a certain way so the payment amount remains constant.
  • loan   Letting another party use something of value temporarily.
  • principal   The original balance of money lent on an outstanding loan and fees, excluding interest. Also the remaining balance of a loan, excluding interest.

More Related Terms and Acronyms

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