Simple Interest Calculator
Find out how much interest accrues on a loan or investment using the simple interest method, where interest is calculated only on the original principal.
What This Calculator Does
This tool calculates simple interest, the most basic way of computing the cost of borrowing money or the return on a straightforward investment. Unlike compound interest, simple interest is charged only on the original principal amount, not on any interest that accumulates over time.
The Formula
Simple interest is calculated as: Interest = Principal × Rate × Time, where the rate is expressed as a decimal (an annual rate of 5% becomes 0.05) and time is measured in years. The total amount owed or earned is simply the principal plus the interest.
When It Applies
Simple interest is commonly used for short-term loans, certain auto loans, and some bonds. Most credit cards, mortgages, and long-term savings accounts instead use compound interest, which grows faster because interest is added to the balance and then itself earns interest.
This calculator is intended for general educational and planning purposes and does not constitute financial advice. Always confirm the exact interest method used by your lender or financial institution before making decisions.