Finance
Simple Interest Calculator
Calculate simple interest earned or owed on any principal amount over a set time period.
Interest Earned
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How It Works
Simple interest is calculated as I = P Γ R Γ T, where P is principal, R is the annual rate as a decimal, and T is time in years. Unlike compound interest, simple interest does not earn interest on previously earned interest.
Example
$5,000 at 5% for 3 years earns $750 in simple interest. Total amount = $5,750.
Frequently Asked Questions
What is simple interest?
Interest calculated only on the original principal, not on accumulated interest. Commonly used for car loans, savings bonds, and short-term loans.
How is simple interest different from compound interest?
Simple interest applies only to the principal. Compound interest applies to both principal and accumulated interest, making it grow faster over time.
When is simple interest used?
Auto loans, personal loans, short-term lending, and some savings certificates often use simple interest calculations.