Whether you're shopping around for a simple interest promissory note or a discount promissory note, the calculation of interest remains the same. However, the two types of notes differ in how they handle interest. For a simple interest promissory note, you pay interest on the loan upon maturity. For a discount promissory note, you pay interest at the commencement of the loan by receiving a note discounted from its face value.

## Calculating Interest

**Count the number of days between the issuance of the promissory note and its maturity** to calculate its term length**.** For example, if a note spans August 15 through November 13, there are 90 days in its term.

**Divide the number of days by 360** to convert the term into a fraction of a year. This fraction might be less than or greater than one year, depending on the term length. In the example, divide 90 by 360 to calculate 0.25 of one year.

**Multiply the fraction of a year by the annual simple interest rate** to calculate the term interest rate. Continuing with the example, if the annual interest rate was 10 percent, multiply 0.25 years by the 0.10 annual rate to get a term rate of 0.025.

**Multiply the term rate by the note's face value** to calculate the interest. If the example's face value was $20,000 multiply 0.025 by $20,000 to get the simple interest of $500.