Simple Interest Calculator
Quickly calculate simple interest, total amount, and interest earned for any principal, rate, and time period.
Frequently Asked Questions
What is the simple interest formula?
Simple Interest (SI) = Principal × Rate × Time / 100, or SI = P × r × t where r is the decimal rate and t is time in years. For $5,000 at 5% for 3 years: SI = $5,000 × 0.05 × 3 = $750. Total Amount = Principal + SI = $5,750. Simple interest is linear — interest does not compound on prior interest.
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 accumulated interest. For the same $5,000 at 5% for 3 years: simple interest yields $750; compound interest (annually) yields $788.13 — a difference of $38. Over longer periods or higher balances, the gap grows dramatically: 20 years of compounding at 7% turns $10,000 into $38,697 vs. $24,000 with simple interest.
When is simple interest used in real life?
Simple interest is used in short-term personal loans, some mortgages (simple interest mortgages), auto loans, short-term bonds, and Treasury bills. Most US auto loans use simple interest calculated on the daily outstanding balance — paying even a few days early reduces the interest charged. Long-term investments and savings accounts almost always use compound interest.