Question 1

When is simple interest used?

Accepted Answer

Simple interest is common for short-term loans, car loans, certain savings accounts, and certificates of deposit. Most mortgages and savings accounts use compound interest instead.

Question 2

Is simple or compound interest better for borrowers?

Accepted Answer

Simple interest is generally better for borrowers because the interest doesn't accumulate on itself. For savers, compound interest is better as it earns more over time.