Definitions for **"Simple Interest Loan"**

A loan on which interest is computed and charged on the actual balance each day instead of on a monthly accrual where interest is charged from one scheduled payment due date to the next, without regard to the date on which the borrower actually pays. The interest paid on simple interest loans will be higher if the borrower's payments are made later than scheduled and lower if the borrower's payments are made earlier than scheduled.

a loan where you pay interest only on

A method of allocating the monthly payment between interest and principal. The interest charged is determined by the unpaid principal balance on the loan, the interest rate, and the number of days since the last payment. The rest of the payment goes to the principal. Making early payments or additional payments will reduce the loan's principal and cut the total interest paid over the life of the loan.