Simple Interest Calculator
Calculate simple interest — interest charged only on the principal, not on previously accrued interest. Used for some short-term loans, savings products and bonds.
How to use the Simple Interest Calculator
- Enter your inputs into the Simple Interest Calculator above.
- Results update instantly as you type — no submit button needed.
- Adjust any value to see how the result changes in real time.
The simple interest formula
I = P · r · t · · · A = P + I
P is the principal, r is the annual rate (decimal), t is time in years. Interest is calculated once, not compounded. The final amount A is principal plus interest.
Worked example
$5,000 at 6% simple interest for 3 years: I = 5,000 × 0.06 × 3 = $900. Final balance: $5,900. The same principal at 6% compounded monthly would grow to about $5,983 — compound adds $83 over this period.
Frequently asked questions
When is simple interest used?
Short-term personal loans, some auto loans, certain bonds and the daily-accrual method on credit cards (which still compounds at month-end).
Is simple interest better for borrowers or lenders?
Borrowers — simple interest is always equal to or less than compound interest at the same nominal rate. Lenders prefer compound interest.
Why does this matter for loans?
For loans labeled "simple interest," every extra payment immediately reduces principal and saves all subsequent interest. Worth confirming with your lender.