Simple Interest Calculator
Calculate simple interest on a principal amount. Simple interest is calculated only on the principal, with no compounding. Formula: I = P × r × t. Useful for short-term loans and basic interest calculations.
Simple interest calculator
Result
What is this?
Simple interest is calculated only on the principal amount. Unlike compound interest, it does not add interest on previously earned interest. Formula: I = P × r × t (interest = principal × rate × time). The total amount is principal plus interest. Simple interest is easier to calculate and predict, which is why it is often used for short-term loans. Car loans and some personal loans use simple interest. The calculator shows both the interest earned and the total amount (principal + interest) at the end of the term.
When to use
Use for short-term loans, car loans, some personal loans, or quick estimates. Example: $5,000 at 6% for 3 years = $900 interest. Simpler than compound interest but less common for long-term investments. Borrowers can quickly estimate total repayment. Lenders use it for short-term agreements. Students learn the concept before moving to compound interest. When the term is short, the difference between simple and compound is small, so simple interest is a reasonable approximation.
How to use
I = P × r × t. Simple interest is calculated on the principal only, no compounding.
I = interest, P = principal, r = rate (decimal), t = time in years
Frequently asked questions
- Simple interest is calculated only on the principal amount. Unlike compound interest, it does not add interest on previously earned interest. Formula: I = P × r × t.
- Simple interest is common for short-term loans, car loans, and some personal loans. It is easier to calculate than compound interest.