About Our Simple Interest Calculator
Calculate simple interest quickly and accurately with our free online calculator. Whether you're planning savings, evaluating a loan, or understanding investment returns, our simple interest calculator provides instant results with a detailed breakdown.
With our calculator, you can:
Calculate total interest earned on your savings or investments
Determine the final maturity amount after a specified period
Add deposits and withdrawals to see how they affect your returns
View a month-by-month breakdown of your interest growth
Visualize results with interactive charts
What is Simple Interest?
Simple interest is a method of calculating interest where the interest is computed only on the original principal amount throughout the entire loan or investment period. Unlike compound interest, simple interest does not earn "interest on interest."
Simple interest is commonly used for:
- Short-term personal loans
- Auto loans
- Certificates of deposit (CDs)
- Some savings accounts
- Treasury bills and bonds
Simple Interest Formula
The formula for calculating simple interest is straightforward:
SI = P × R × T
Where:
- SI = Simple Interest (the interest earned or paid)
- P = Principal (the initial amount of money)
- R = Rate of Interest (annual interest rate as a decimal)
- T = Time (duration in years)
To find the total amount (A) after interest:
A = P + SI = P × (1 + R × T)
Simple Interest Example
Let's say you deposit $10,000 in a savings account that pays 5% simple interest per year for 3 years.
SI = P × R × T
SI = $10,000 × 0.05 × 3
SI = $1,500
Total Amount = $10,000 + $1,500 = $11,500
After 3 years, you would earn $1,500 in interest, and your total balance would be $11,500.
When is Simple Interest Used?
Simple interest is commonly applied in the following scenarios:
Auto Loans: Many car loans use simple interest calculated on the remaining balance
Personal Loans: Short-term personal loans often use simple interest
Certificates of Deposit: Some CDs pay simple interest rather than compound
Treasury Bills: Government securities often use simple interest calculations
Consumer Credit: Some store financing and installment plans use simple interest
Simple Interest vs Compound Interest
Understanding when to use each type of interest calculation can help you make better financial decisions, whether you're borrowing or investing.
Interest Calculation
Simple: Only on principal
Compound: On principal + accumulated interest
Growth Pattern
Simple: Linear (constant)
Compound: Exponential (accelerating)
Interest Amount
Simple: Same each period
Compound: Increases each period
Long-term Returns
Simple: Lower
Compound: Significantly higher
Which is Better For You?
Choose Simple Interest When...
- You're borrowing money (pay less interest)
- Short-term investments (under 1 year)
- You need predictable, fixed returns
Choose Compound Interest When...
- You're saving or investing (earn more)
- Long-term investments (5+ years)
- You want exponential growth over time
Real Example: $10,000 at 5% for 10 years
Simple Interest
$5,000 interest earned
Compound Interest
$6,470 interest earned (+$1,470)
* Compound interest calculated with annual compounding. The difference grows even larger over 20-30 years.