Simple Interest Calculator
Quickly calculate simple interest and total amount with ease.
📘 What Is Simple Interest?
Simple interest is a straightforward way to calculate the cost of borrowing money or the reward for lending it. It’s based solely on the original amount (called the principal) — not on any interest that has already been added.
This type of interest is commonly used in short-term loans, savings bonds, and certain investments. Unlike compound interest, simple interest doesn’t grow over time from accumulated interest, making it easier to understand and calculate.
🧮 How Simple Interest Works
Simple interest is determined by multiplying the principal, interest rate, and time period. It’s ideal for situations where you’re either borrowing or lending money for a set term and want predictable interest charges or earnings.
It’s especially beneficial for borrowers because the interest remains fixed throughout the loan term. For lenders or investors, however, it may not be as profitable as compound interest since it doesn’t grow exponentially.
💡 Simple Interest Formula
The formula to calculate simple interest is:
Interest = Principal × Rate × Time
Or:
I = P × r × t
Where:
I = Simple interest earned or owed
P = Principal amount (original loan or deposit)
r = Annual interest rate (as a decimal)
t = Time in years
You can adjust the time to match different periods. For example, for six months, use t = 0.5.
🕒 Interest for Monthly, Daily, or Custom Periods
To calculate simple interest on a more frequent basis (like monthly or daily), use:
I = P × r × n
Where:
I = Interest
P = Principal
r = Interest rate per period
n = Number of periods
This version is useful if you’re working with shorter loan durations or recurring payments like monthly billing cycles.
🔍 Example Calculations
✅ Using the Formula I = P × r × t
Imagine you borrow $10,000 with a 5% annual interest rate for 5 years.
Interest = $10,000 × 0.05 × 5 = $2,500
Total repayment = $10,000 + $2,500 = $12,500
✅ Using the Formula I = P × r × n (Monthly Interest)
Now, say you want to calculate interest monthly with a 5% monthly interest rate for 12 months.
Interest = $10,000 × 0.05 × 12 = $6,000
Total repayment = $10,000 + $6,000 = $16,000
💼 Where Is Simple Interest Commonly Used?
Simple interest is frequently used in:
Short-term personal loans
Car loans
Some types of bonds
Installment loans
Educational tools or calculators (like ours!)
It’s not commonly used in savings or checking accounts, where compound interest is more typical.
📊 Simple vs Compound Interest: What’s the Difference?
Simple interest grows linearly — you earn or pay the same amount each period.
Compound interest grows exponentially — interest is calculated on both the principal and previously earned interest.
Which is better?
Borrowers benefit from simple interest because it costs less over time.
Investors or savers benefit more from compound interest due to higher long-term growth.
Comparison Example:
$10,000 loan at 5% simple interest for 5 years = $2,500 interest
$10,000 loan at 5% compounded monthly for 5 years = $2,833.59 interest
Use Our Simple Interest Calculator
Our calculator makes it easy to find:
How much interest you’ll owe or earn
Your total repayment or return
How time and rate changes affect your outcomes
Just plug in your principal, rate, and time, and we’ll do the math for you instantly!
Frequently Asked Questions (FAQs)
1. What is simple interest?
Simple interest is the amount of interest earned or paid only on the original amount of money (called the principal). It doesn’t take into account any interest that may have previously been added.
2. How do I calculate simple interest?
Use the formula:
Simple Interest = Principal × Rate × Time
Just enter your initial amount, interest rate, and time period into our calculator, and it will compute the total interest for you.
3. What units should I use for time in the formula?
Time should be in years. If you’re calculating for months or days, convert it accordingly.
6 months = 0.5 years
90 days = 90 ÷ 365 ≈ 0.2466 years
4. What is the difference between simple and compound interest?
Simple interest is calculated only on the original principal.
Compound interest is calculated on the principal plus any previously earned interest.
Compound interest usually results in more earnings or higher repayments over time.
5. Is simple interest good for loans?
Yes, for borrowers, simple interest loans are often more affordable because you only pay interest on the original amount, not on previously accrued interest.
6. What is the “principal” in simple interest?
The principal is the original amount of money borrowed or invested, before any interest is applied.
7. What types of financial products use simple interest?
Simple interest is commonly used for:
Short-term personal loans
Auto loans
Bonds with fixed interest payments
Some installment loans
8. Can I calculate future value using simple interest?
Yes. Once you know the interest amount, you can add it to the principal to find the total future value:
Future Value = Principal + Interest