Simple Interest Calculator

How simple interest works

Simple interest is calculated only on the original principal, never on interest already earned. The formula is Interest = Principal × Rate × Time, where the rate is the annual percentage and time is measured in years. For example, $10,000 at 5% for 3 years earns 10,000 × 0.05 × 3 = $1,500, leaving a final balance of $11,500.

Simple vs. compound interest

The key difference is what the interest is charged on. Simple interest always uses the original principal, so it grows in a straight line. Compound interest is calculated on the principal plus previously accrued interest, so it accelerates over time. For short terms the two are close; over many years compound interest pulls far ahead. Simple interest is common for car loans, short-term personal loans, and some bonds, while savings accounts and most investments use compounding.

How to use this calculator

• Principal — the starting amount you invest or borrow.
• Annual rate — the yearly interest rate as a percentage.
• Time — the length of the term; switch between years and months as needed.

The interest, final balance, and interest per year update instantly as you type.

FAQ

Does the time have to be in whole years?

No. You can enter fractional years (like 2.5) or switch to months — the formula handles partial periods exactly, since simple interest accrues evenly over time.

Is this how loan interest usually works?

Some loans, like many auto loans, use simple interest on the outstanding balance. Others use amortization or compounding. Check your loan agreement; for an amortized loan, use a loan or mortgage payment calculator instead.

What's the interest-per-year figure?

It's the flat amount earned each year (Principal × Rate). Because simple interest doesn't compound, this amount is the same every year of the term.