Simple Interest Calculator
Calculate simple interest, total amount, and interest earned using principal, rate, and time.
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How to use this calculator
Interest = Principal × Annual Rate (%) ÷ 100 × Time (years)
- 1
Enter the principal amount — the initial sum you are investing or borrowing.
- 2
Enter the annual interest rate as a percentage (e.g. 5 for 5%).
- 3
Enter the time period in years.
- 4
The calculator shows the total interest earned and the final amount.
Frequently asked questions
What is simple interest?
Simple interest is calculated only on the original principal amount. It does not compound — interest earned in one period does not earn additional interest in later periods.
What is the difference between simple and compound interest?
Simple interest is calculated only on the principal. Compound interest is calculated on the principal plus previously earned interest. Over time, compound interest grows significantly faster.
Where is simple interest used?
Simple interest is used for short-term loans, car loans, some personal loans, and savings bonds. Most bank accounts and investments use compound interest.
How do I calculate simple interest for months instead of years?
Convert months to years by dividing by 12. For example, 6 months = 0.5 years. Enter 0.5 in the time field.
Understanding simple interest
How simple interest works
Simple interest grows linearly. $10,000 at 5% for 3 years earns the same $500 each year — $1,500 total. There is no "interest on interest." This makes it easy to calculate and predict, which is why it is used for short-term and fixed-term products.
Simple interest vs compound interest
On the same $10,000 at 5% for 10 years: simple interest earns $5,000 total. Compound interest (annual) grows to $16,289 — earning $6,289. The gap widens dramatically over time. For borrowers, simple interest is cheaper; for investors, compound interest is better.
Real-world examples
A $5,000 car loan at 8% simple interest for 4 years: I = 5,000 × 0.08 × 4 = $1,600 interest, total repayment $6,600. A 90-day treasury bill at 4% annual simple interest on $10,000: I = 10,000 × 0.04 × (90/365) = $98.63.
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Results are estimates for informational purposes only and do not constitute professional financial, medical, legal, or technical advice. Read full disclaimer →