Calculate simple interest earned or owed on a principal amount over a given time period.
This calculator computes simple interest — interest calculated only on the original principal amount, without compounding — based on a principal amount, an annual interest rate, and a time period.
Unlike compound interest, simple interest is calculated only on the original principal amount for the entire period — it does not earn (or charge) interest on previously accumulated interest. This means simple interest grows linearly over time, by the same dollar amount each year.
Formula: Interest = Principal × Rate × Time, where Rate is expressed as a decimal (Annual Rate ÷ 100) and Time is in years. Total Amount = Principal + Interest.
Example: A CA$10,000 principal at a 5% annual interest rate (example rate — enter your actual rate) over 3 years would earn CA$1,500 in simple interest (CA$10,000 × 0.05 × 3), for a total amount of CA$11,500. Note that this is different from compound interest over the same period, which would give a slightly higher result since each year's interest would itself earn interest. (Note: this example is for illustration purposes only.)
Most everyday savings accounts, GICs, and mortgages in Canada use compound interest, not simple interest (see our Compound Interest Calculator, Savings Calculator, and GIC Calculator for compounding examples). However, simple interest still appears in certain contexts: some short-term loans and promissory notes calculate interest this way, and it's a useful concept for understanding the time value of money in finance education generally. Simple interest is also sometimes used as an approximation for very short time periods, where the difference between simple and compound interest is small. If you're unsure whether an agreement uses simple or compound interest, check the terms carefully — for longer periods or higher rates, the difference between the two methods can become significant, with compound interest always producing a higher total than simple interest at the same nominal rate (assuming interest is reinvested or compounded rather than paid out).
Simple interest is calculated only on the original principal for the entire period, so it grows by the same dollar amount each year. Compound interest is calculated on the principal plus any previously accumulated interest, so it grows by an increasing dollar amount each year. Over the same rate and time period, compound interest always produces more total interest than simple interest (assuming interest compounds rather than being paid out).
Generally no - most savings accounts, GICs, and investment products in Canada use compound interest, where interest is calculated on the growing balance over time. See our Compound Interest Calculator, Savings Calculator, or GIC Calculator for products that compound. This simple interest calculator is more useful for specific agreements that explicitly state simple interest, or for educational purposes.
Yes - enter the time period as a decimal fraction of a year. For example, 6 months would be 0.5, 3 months would be 0.25, and 18 months would be 1.5. The formula scales linearly, so simple interest for half a year would be exactly half of the simple interest for a full year at the same rate.
Simple interest is straightforward to calculate and understand, which is why it's sometimes used for short-term loans, certain promissory notes, or specific contractual agreements. It generally results in less total interest than compound interest over the same nominal rate and period, which can make it more favourable to a borrower (and less favourable to a lender) compared to compounding.
Rearranging the formula: Rate = Interest ÷ (Principal × Time). For example, if CA\$10,000 earned CA\$1,500 in interest over 3 years, the rate would be 1,500 ÷ (10,000 × 3) = 0.05, or 5%. This calculator is set up to solve for interest given a rate, but the formula can be rearranged to solve for any of the four variables if you know the other three.
If you're borrowing money, simple interest generally results in less total interest paid compared to compound interest at the same rate, which is favourable to you as a borrower. If you're investing or saving money, compound interest generally results in more total interest earned, which is favourable to you as a saver or investor. The "better" option depends on which side of the transaction you're on.
Disclaimer: The information and figures provided on this page are for educational and illustrative purposes only and do not constitute financial advice. The interest rate used is an example only and does not represent a rate currently offered by any specific lender or financial institution. Most savings, investment, and loan products in Canada use compound rather than simple interest - always check your specific agreement for the actual interest calculation method. Consult a qualified financial adviser for personalised advice.