Reach Financial loans have simple interest. Here’s why that matters:
Simple interest is calculated only on your current loan balance, also called the principal. This means if you pay early or make extra payments, you save money because interest is charged only on the remaining balance.
Compounding interest, like what you often see with credit cards, works differently. Interest is calculated not just on the principal, but any unpaid interest is added to your balance. Over time, this means you can end up paying interest on both the original loan amount and the accumulated interest.
In short:
With simple interest loans, interest accrues only on the unpaid principal, so paying down your loan faster reduces future interest charges. With compounding interest, unpaid interest may be added to your balance and can itself generate more interest.