How is this different from compound interest?

Simple interest is always calculated on the original principal. Compound interest is calculated on the principal plus any interest already earned, so it grows faster over time.

Where is simple interest actually used?

Some auto loans, short-term promissory notes, and certain bonds use simple interest. Most savings accounts, credit cards, and mortgages use compound interest instead.

Simple Interest Calculator

Calculate interest that accrues on a fixed principal at a constant rate, without compounding — common for short-term loans, certain bonds, and basic interest problems.

Principal

Interest earned

How this calculator works

Simple interest is calculated as I = P * r * t, where P is the principal, r is the annual interest rate (as a decimal), and t is the time in years. Unlike compound interest, the interest earned each period is always based on the original principal, never on previously earned interest.

Formula reference: Investopedia: Simple Interest

Example

Example: a $10,000 principal at a 5% simple annual interest rate for 3 years earns $1,500 in interest, for a total of $11,500, regardless of how the 3 years are split up.

Frequently asked questions

How is this different from compound interest?: Simple interest is always calculated on the original principal. Compound interest is calculated on the principal plus any interest already earned, so it grows faster over time.
Where is simple interest actually used?: Some auto loans, short-term promissory notes, and certain bonds use simple interest. Most savings accounts, credit cards, and mortgages use compound interest instead.

This calculator provides estimates for general informational purposes only and does not constitute financial, tax, or legal advice. Always confirm important numbers with a qualified professional or your lender/institution before making a decision.