The difference between a simple interest loan and compound interest loan is: B. Interest only applies to the principle of the simple interest loan, but applies to the principle and accrued interest of the compound interest loan.
Simple interest loan can be defined as the loan that are not compounded based on the fact that this type of loan enables a borrower to pay the principal amount plus the interest amount during repayment.
On the other hand compound interest loan can be defined as the type of loan this is often compounded which implies that whenever the principal amount accumulate interest, the interest accumulated is included with the principal amount making the interest and principal amount to continue to increase.
Therefore the correct option is B.
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