Calculate simple interest earned or owed on a principal amount over a given time period.
A simple interest calculator computes the interest earned or owed on a principal amount over a given time period, using a fixed rate that applies only to the original principal — unlike compound interest, where interest is also earned on previously accumulated interest. It's useful for understanding basic loans, short-term notes, or any situation where simple interest applies.
Simple interest is calculated only on the original principal amount, and doesn't change based on previously accrued interest — this makes it straightforward to calculate but generally results in less interest over time compared to compound interest at the same rate.
Formula: Interest = Principal × Rate × Time, where Rate is expressed as a decimal (e.g., 5% = 0.05) and Time is in years. Total Amount = Principal + Interest.
Example: For a $10,000 principal at a 5% annual interest rate (example rate — enter your actual rate) over 3 years, the interest would be $10,000 × 0.05 × 3 = $1,500, for a total amount of $11,500. (Note: all figures in this example are for illustration purposes only.)
Simple interest is used in some types of loans and financial instruments, particularly shorter-term loans, certain bonds, and some promissory notes. Most savings accounts, CDs, mortgages, and credit cards in the US use compound interest instead, where interest is calculated on the growing balance (including previously earned interest), which results in faster growth (for savings) or faster accumulation (for debt) over time compared to simple interest at the same rate.
Simple interest is calculated only on the original principal and stays the same each period. Compound interest is calculated on the principal plus any previously accumulated interest, so it grows faster over time at the same rate.
Some shorter-term loans, certain bonds, and some promissory notes use simple interest. Most common consumer products — savings accounts, mortgages, auto loans, and credit cards — typically use compound interest instead.
Use a decimal value — for example, enter 0.5 for 6 months or 0.25 for 3 months, since the time period field is in years.
Yes — the formula is the same whether you're calculating interest earned on an investment or interest owed on a loan. The "principal" would be your investment or loan amount, respectively.
No. If this calculation represents interest earned on an investment, any taxes owed on that interest are not included and would reduce your effective return.
Because simple interest is always calculated on the original principal only, while compound interest is calculated on a growing balance that includes previously earned interest — so compound interest accelerates over time while simple interest stays constant per period.
Disclaimer: The information, rates, and figures provided on this page are for educational and illustrative purposes only. All rates and examples shown are sample values and do not reflect the actual rate that applies to your loan, investment, or financial product. Financial rules and regulations change frequently. Always consult a qualified financial advisor before making any financial decisions.