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Simple Interest Calculator

Simple interest is calculated only on the original amount, not on interest already earned. It is used for many short-term loans, some bonds and basic school problems.

How it works Report a problem

Simple Interest

Quickly calculate interest based on the principal amount and rate

$0
Total Interest Earned
Over the full duration
Total Principal
$0
Total Value (A)
$0
Principal vs Interest

About the Simple Interest Calculator

Simple interest is calculated only on the original amount, not on interest already earned. It is used for many short-term loans, some bonds and basic school problems.

How to use the Simple Interest Calculator

  1. Enter the Principal Amount ($).
  2. Enter the Interest Rate (%) per year and the Time Period (Years).
  3. Press Calculate Interest to see the interest earned and the total amount.

Formula and method

Interest = P × r × t and Total = P + Interest

P is the principal, r the annual rate as a decimal and t the time in years.

Worked example

$5,000 at 6% for 3 years: 5,000 × 0.06 × 3 = $900 interest, so the total is $5,900.

Three years of simple interest. 5,000 at 6% a year for 3 years earns 5,000 × 0.06 × 3 = 900, so the total is 5,900. With yearly compounding it would be about 5,955, so the compounding effect is small over a short time.

When to use the Simple Interest Calculator

  • Short-term loans, bonds and some personal lending where interest is not compounded.
  • School and exam problems on interest.
  • Quickly estimating interest on an amount over a few months or years.

Common mistakes to avoid

  • Using simple interest for accounts that actually compound.
  • Forgetting to convert months to years, for example 6 months is 0.5 years.

Tips

  • For months, divide by 12 (for example 6 months = 0.5 years).
  • Simple interest grows in a straight line. Compound interest grows faster over long periods.

Frequently asked questions

When is simple interest used?
Car loans, some personal loans, short-term notes and certain bonds calculate interest on the principal only.
What is the difference from compound interest?
Compound interest adds earned interest to the balance, so future interest is calculated on a bigger amount.
What is the formula for simple interest?
Interest = Principal × Rate × Time, with the rate as a decimal per year and the time in years.
When is simple interest used?
On some car loans, short-term loans and certain bonds where interest is paid out rather than added to the balance.