Principal x interest rate x loan termTo illustrate, let’s say that you borrowed ₱10,000 that has to be paid in 2 years. The agreed interest rate is 3%. Therefore:
Simple interest: ₱10,000 x 3% x 2 = ₱600This means you’ll be paying ₱600 on top of the ₱10,000 you borrowed.Your goal is to pay the combined portions of the principal loan and interest rate every month on time and in full. Otherwise, you might be charged a late payment fee, or your outstanding balance would gain interest. If the latter happens, you would have to contend with ballooning compound interest, which is basically interest on interest.