Simple Interest Calculator — Free Online Tool
Simple interest is the straightforward kind: you earn (or pay) interest only on the original principal, never on accumulated interest. It's common in short-term loans, auto loans, and some savings products.
What is the Simple Interest Calculator?
Simple interest is calculated once on the starting amount, then multiplied by time. A $1,000 loan at 5% simple interest for 3 years costs exactly $150 in interest — $50 per year, every year. There's no compounding, so the math stays linear and predictable.
Compare that with compound interest, where unpaid interest starts earning its own interest. Over short periods the two are close; over long periods compounding pulls far ahead. Lenders must disclose which method they use — for long-term borrowing, simple interest is usually cheaper for you, while for long-term saving, compounding is better.
How to use this calculator
- Enter the principal amount.
- Enter the annual rate as a percent.
- Enter the time in years (decimals allowed, e.g. 1.5).
- Click Calculate for interest and total amount.
Formula
Frequently asked questions
When is simple interest used?
Short-term personal loans, some auto loans, and certain bonds or deposits use simple interest. Mortgages and credit cards use compounding.
Is simple interest better than compound interest?
As a borrower, yes — you pay less. As a saver or investor, compounding earns you more.
Can time be in months?
Yes — convert months to years first (6 months = 0.5 years) and enter the decimal.
What if the rate changes during the term?
Calculate each period separately with its own rate and add the results.