Simple Interest Calculator
What is a Simple Interest Calculator?
Simple interest is calculated only on the original amount you borrowed or deposited - not on previously earned interest. It is commonly used for short-term loans, car loans in some markets, and promissory notes. This calculator shows the interest and the total amount for any principal, rate and term.
Enter the principal, the annual interest rate and the time in years. The calculator applies the formula I = P × r × t, where I is interest, P is principal, r is the annual rate and t is time. It also shows your annual interest so you can compare offers easily. For savings that compound, check the compound interest calculator instead.
Frequently Asked Questions
What is the formula for simple interest?
Simple interest = principal × rate × time, written I = P × r × t. For $10,000 at 5% for 3 years: 10,000 × 0.05 × 3 = $1,500 in interest. The total repaid is $11,500.
What is the difference between simple and compound interest?
Simple interest is charged only on the original principal, while compound interest is charged on the principal plus any interest already added. Compound interest grows faster over time; simple interest is more predictable and common for short-term borrowing.
Which loans use simple interest?
Simple interest is typical for car loans, personal loans and short-term credit products. Mortgages and long-term loans often use amortization, where each payment covers interest and gradually more principal - the compound interest calculator and loan payment calculator cover those cases.