Which describes the difference between simple and compound interest? Simple interest is paid on small, short-term loans, while compound interest is paid on large, long-term loans. Simple interest is paid on the principal, while compound interest is paid on the principal and interest accrued. Simple interest is paid on large, long-term loans, while compound interest is paid on small, short-term loans. Simple interest is paid on the principal and interest accrued, while compound interest is paid only on the principal.