Simple Interest Calculator
Calculate simple interest and the total amount due from principal, rate, and time.
Work out simple interest — interest charged only on the original principal — from an amount, a rate, and a time period. The calculator shows both the interest and the total you'd repay or receive.
The formula
Simple interest is I = P × r × t, where P is the principal, r is the annual rate as a decimal, and t is the time in years. The total amount is principal plus interest. Because interest never compounds, the amount earned each year is identical — unlike compound interest, which accelerates.
Where simple interest still applies
Although compound interest dominates savings and mortgages, simple interest hasn't disappeared. It's common on some short-term and personal loans, certain car financing, and many bonds that pay a fixed coupon on the face value. Because the interest each period is the same, simple-interest products are easy to reason about — the total is just principal plus a flat charge — which is exactly why they're used where transparency matters more than the small extra a lender would earn from compounding.
Simple versus compound, in plain terms
Simple interest is calculated only on the original principal, never on interest already earned. Lend $1,000 at 5% simple interest and you earn exactly $50 every year — year one, year five, year twenty. That predictability is why simple interest shows up in short-term instalment loans, certain bonds, and many informal agreements between people who want a figure everyone can verify with a pocket calculator.
Compound interest, by contrast, pays interest on interest, so the same $1,000 grows faster because each year's interest joins the principal for the next. Over a single year the two are identical; over decades the gap becomes enormous. Knowing which one applies to a given loan or deposit is not a technicality — it changes what you actually pay or receive. Use this simple-interest calculator when an agreement genuinely uses the flat method, and switch to a compound calculator whenever interest is described as accruing "compounded" monthly, quarterly, or annually. Reading the fine print for that one word tells you which tool to trust.
Frequently asked questions
When is simple interest used?
It's common on short-term loans, some car loans, and certain bonds. Many savings and long-term loans use compound interest instead.
How is it different from compound interest?
Simple interest is charged only on the original principal, so it grows in a straight line. Compound interest is charged on principal plus accumulated interest, so it grows faster.
How much more does compound interest earn than simple?
Over short periods, very little. The gap widens with time and rate: over decades, compounding can produce dramatically more, because it earns interest on previously earned interest.
Does the rate here need to be annual?
Enter an annual rate and time in years for the standard result. If you're working in months, convert consistently — the formula multiplies rate by time, so the units must match.
When is simple interest actually used?
It is common in short-term personal loans, car loans in some regions, and certain fixed-income products. Always check the loan agreement, since many products compound instead.
Last updated: 2026-01-15