Simple Interest Calculator
Calculate interest that accrues only on the original principal — no compounding, straight-line growth.
Understanding the Simple Interest Calculator
Simple interest is calculated only on the original principal for every period — it never earns interest on interest already accrued. That makes it grow in a straight line rather than a curve, and it’s easy to predict: double the time, and the interest roughly doubles too.
You’ll see simple interest used for some short-term loans, certain bonds, and basic interest calculations in textbooks. It’s less common for long-term savings and investment products, which almost always compound, but it’s a useful baseline for understanding what compounding actually adds.
Compare the same principal, rate, and time in the compound interest calculator to see exactly how much extra growth compounding contributes over a longer horizon.
See it in practice
Example 1 — Three-year loan
Example 2 — Short-term note
Common questions
Common examples include some auto loans, short-term personal notes, certificates of deposit in certain structures, and many introductory finance problems. Always check your loan or account terms — the label ‘simple’ isn’t always used explicitly.
For savers, compound interest grows faster over time, so it’s generally more favorable. For borrowers, simple interest is usually cheaper than compound interest at the same nominal rate, since interest doesn’t build on interest.
Yes — enter time as a decimal, like 0.5 for six months or 0.25 for a quarter, and the calculation still holds.
No, this is a flat calculation for the full stated term. For a loan you’re paying down early, see the debt payoff or credit card payoff calculators.
Simple interest is calculated as Interest = Principal × Rate × Time. Unlike compound interest, the interest is calculated only on the original principal for the entire period, growing at a steady, linear pace.
Simple interest shows up in certain short-term loans, some auto loans, and a handful of bond structures. Most everyday savings accounts and credit cards use compound interest instead.
Yes, for borrowers, simple interest is generally better, since the amount owed grows at a steady, predictable pace rather than accelerating as unpaid interest gets added to the balance, as it can with compound interest.
At a 5% annual simple interest rate, $10,000 would earn $500 a year, or $2,500 total over 5 years, since simple interest is calculated only on the original principal each year, not on any previously earned interest.