Simple Interest Calculator
Simple interest is charged on the original principal only, so the amount added is the same every year: I = P × r × t, and the balance ends at A = P(1 + rt). Enter a principal, an annual rate and a term to see the interest, the total, and how much more the identical money would have earned had it compounded instead.
- Accurate
- Real-time
- Easy to use
- 100% free
Total interest
$3,000.00
Interest per year
$600
Details
Updates as you typeThe amount borrowed or deposited. Simple interest is charged on this figure alone, never on interest already earned.
The quoted yearly rate, r in the formula.
Fractions are fine: 0.5 is six months, 0.25 is a quarter, 0.1 is about five weeks.
The same principal, rate and term compounded this often, shown alongside for contrast.
Summary
Noticeable gap — 10% to 30% moreTotal interest
$3,000.00
Total amount
$13,000.00
- Principal$10,00077%
- Simple interest$3,00023%
- Total amount
- $13,000
- Interest per year
- $600
- Compound interest, same terms
- $3,489
- Extra from compounding
- $489
- Term
- 5 years
- Simple interest never earns interest on interest, so the amount added each year is identical from the first year to the last.
- Both figures assume the same nominal rate, no fees or tax, and no payments or withdrawals during the term.
How this is calculated
- Principal (P)
- $10,000
- Annual rate (r)
- 6.00%
- Term in years (t)
- 5.00 yr
- r × t
- 30.00%
- Simple interest, P × r × t
- $3,000
- Total amount, P(1 + rt)
- $13,000
- Compounded total, P(1 + r/n)^nt
- $13,489
- Interest under compounding
- $3,489
- Difference
- $489
Years
Compare scenarios
See how one change moves the result
- CurrentYour inputs as they stand$3,000.00Current
- Principal$ 12,500$3,750.00
- Annual interest rate% 7.5$3,750.00
- Termyr 6.25$3,750.00
For informational purposes only. This is not financial advice — confirm major decisions with a licensed advisor.
Frequently asked questions
What is the simple interest formula?
Interest is I = P × r × t, where P is the principal, r is the annual rate written as a decimal, and t is the term in years. The total at the end is A = P(1 + rt). A $10,000 deposit at 6% for five years earns 10,000 × 0.06 × 5 = $3,000, so $13,000 comes back.
How is simple interest different from compound interest?
Simple interest is always calculated against the original principal, so the amount added in year ten is identical to the amount added in year one. Compound interest is calculated against the running balance, so each period starts from a larger number and the interest itself starts earning. Over long terms the two diverge enormously: the same $10,000 at 6% for forty years earns $24,000 simple, but about $99,000 compounded monthly.
Where is simple interest actually used?
Most car loans and personal instalment loans in the US accrue simple interest on the outstanding balance, as do many short-term bridging loans, margin accounts, and government bills quoted on a day-count basis. Flat-rate and "add-on" quotes in retail finance are simple interest too, which is why the advertised rate looks so much lower than the APR.
Can simple interest ever beat compound interest?
Yes, over a term shorter than a single compounding period. Take 12% for three months compounded annually: simple interest returns r × t = 3.00% of the principal, while compounding returns 1.12 raised to the power 0.25, minus one, which is 2.87%. Compounding only pulls ahead once at least one whole period has elapsed, which is why the difference shown here can be negative.
How do I enter a term in months or days?
Divide by twelve or by 365 and type the result into the box: six months is 0.5, and ninety days is 90 ÷ 365 = 0.2466. Lenders differ on whether they count 360 or 365 days in a year, and on a short term that choice alone moves the interest by about 1.4%, so check which convention the contract uses before relying on a figure to the cent.