Simple Interest Calculator
Calculate simple interest instantly. Enter the principal amount, interest rate, and time period to get the interest earned and total amount.
Table of Contents
What is Simple Interest?
Simple interest is a method of calculating interest on a loan or investment where interest is calculated only on the principal amount (the original sum of money). Unlike compound interest, simple interest does not accumulate on previously earned interest.
Simple interest is straightforward and easy to calculate, making it ideal for short-term loans, certain types of savings accounts, and financial planning scenarios where you need a quick estimate of interest earnings or costs.
The key characteristic of simple interest is that it remains constant throughout the loan or investment period—you earn or pay the same amount of interest each period based solely on the original principal.
How it Works
Our Simple Interest Calculator makes it easy to calculate interest and total amounts:
- Enter Principal: Input the initial amount of money (loan or investment)
- Enter Interest Rate: Input the annual interest rate as a percentage (e.g., 5 for 5%)
- Enter Time Period: Input the duration in years, months, or days
- Get Results: Instantly see the interest earned and total amount
The calculator automatically converts time periods to years (if needed) and performs the calculation in real-time as you enter values. Results are displayed with clear formatting and include the formula breakdown.
Simple Interest Formula
The simple interest formula is:
To find the total amount (A) after the time period, add the interest to the principal:
For time periods in months or days, convert to years first:
- Months to years: divide by 12 (e.g., 6 months = 0.5 years)
- Days to years: divide by 365 (e.g., 90 days ≈ 0.247 years)
Common Use Cases
- Short-term Loans: Calculate interest on personal loans, payday loans, or short-term borrowing
- Savings Accounts: Estimate interest earnings on simple interest savings accounts
- Investment Planning: Calculate expected returns on simple interest investments
- Loan Comparison: Compare different loan offers to understand total interest costs
- Financial Education: Learn and understand how simple interest works
- Quick Estimates: Get fast calculations for financial planning and budgeting
- Business Loans: Calculate interest on business loans that use simple interest
Calculation Examples
Example 1: Savings Account
You deposit $10,000 in a savings account with a 3% annual simple interest rate for 2 years.
Total Amount = $10,000 + $600 = $10,600
Example 2: Short-term Loan
You borrow $5,000 at 8% annual simple interest for 6 months (0.5 years).
Total Amount to Repay = $5,000 + $200 = $5,200
Example 3: Investment
You invest $25,000 at 4.5% annual simple interest for 3 years.
Total Amount = $25,000 + $3,375 = $28,375
Simple Interest vs Compound Interest
Simple Interest
- Interest calculated only on the principal amount
- Interest remains constant each period
- Easier to calculate and understand
- Lower total interest over time
- Common for short-term loans and some savings accounts
Compound Interest
- Interest calculated on principal plus previously earned interest
- Interest grows exponentially over time
- More complex calculation
- Higher total interest over time
- Common for long-term investments, mortgages, and most savings accounts
For long-term investments, compound interest typically yields significantly more returns. For short-term scenarios, the difference may be minimal, making simple interest calculations useful for quick estimates.
Frequently Asked Questions
Simple interest is calculated only on the principal amount, while compound interest is calculated on the principal plus previously earned interest. This means compound interest grows faster over time, especially for long-term investments. Simple interest is easier to calculate and is often used for short-term loans.
Our calculator automatically handles conversions. For manual calculations: divide months by 12 (6 months = 0.5 years) and divide days by 365 (90 days ≈ 0.247 years). The calculator does this conversion automatically when you select months or days as the time unit.
This calculator shows total interest over the entire period. For loans with regular payments, you may want to use our Loan Calculator or Loan Amortization Calculator, which handle payment schedules and show how interest is paid over time.
No. All calculations happen entirely in your browser. We don't store, log, or transmit any values you enter. Your calculations are completely private.