How Does Simple Interest Work?
You are charged a daily interest factor on the outstanding principal balance. To determine your daily interest factor you multiply the current principal balance by the interest rate on your loan divided by 365. For example, a loan with a principal balance of $100,000.00 with a 7.5% interest rate would have a daily interest factor of $20.55 ($100,000.00 x .075 รท 365 = $20.55). When making your regular monthly payments, the interest due is paid first before the remaining amount is applied to the principal balance.
