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Timeshare Financing: What is Simple Interest?

Interest is of prime importance when timeshare financing.  When you finance timeshare purchases you will have to pay interest on whatever type of loan you take out.

When buying timeshares with either resort or your own bank financing, the interest charged can be either simple interest or compound interest. Here, we explain what simple interest is and take a quick look at compound interest for comparison.

The definition of simple interest is:

Simple interest is when interest is calculated on the original principle only. Any interest that has been accumulated from prior payment periods is not used when calculating payments for the following payment periods.  

In easy-to-understand terms this means that you pay your interest each month only on the original amount that you borrowed. As long as the interest rate percentage does not change, your monthly payments will remain exactly the same for the life of your loan.

In contrast, compound interest includes any interest previously paid. It is most common when you have an interest paying account with your bank. The amount of interest the bank paid you is added to your balance so when the next interest payment becomes due it is on the balance at that time, including the previous month's interest payment.