Simple Interest Calculator
This calculator computes simple interest — interest calculated only on the original principal, not on accumulated interest. Enter the principal, annual interest rate, and number of years to see the interest earned or owed and the total amount.
How It Works
Simple interest does not compound — interest is always calculated on the original principal, not on previously earned interest. It is commonly used for short-term loans, car loans with simple-interest structures, and some savings products. For investments that reinvest returns, compound interest will produce a higher total.
Worked Examples
Example 1. Principal: $5,000. Rate: 6%. Time: 3 years. Interest = $5,000 × 0.06 × 3 = $900. Total = $5,900.
Example 2. Principal: $10,000. Rate: 4.5%. Time: 2 years. Interest = $10,000 × 0.045 × 2 = $900. Total = $10,900.
When to Use This Calculator
Use for short-term loans, certificate-of-deposit estimates with simple interest, or any situation where interest does not compound.
Frequently Asked Questions
What is the difference between simple and compound interest?
Simple interest is calculated only on the principal. Compound interest is calculated on the principal plus previously accumulated interest, producing higher returns over time.
Do most savings accounts use simple interest?
No — most savings accounts compound daily or monthly. Use the Compound Interest Calculator for those.
Can I use this for a partial year?
Yes — enter time as a decimal (e.g., 0.5 for 6 months).