Simple Interest Calculator
Calculate simple interest on a principal amount over time
Simple Interest Details
Interest Earned
$2,500.00
Total Amount
$12,500.00
Our simple interest calculator computes interest earned when interest is calculated only on the principal amount, not on accumulated interest. Simple interest is commonly used for short-term loans and some savings accounts.
What is calculators.simple-interest-calculator.title?
Simple interest is calculated only on the principal amount, without compounding. It's straightforward: Interest = Principal × Rate × Time.
Simple interest is typically used for short-term loans, some savings accounts, and bonds. Unlike compound interest, it doesn't grow exponentially over time.
This calculator helps you understand simple interest calculations and compare them to compound interest to see the difference over time.
How to Use This Calculator
- 1
Principal
Enter the initial amount.
- 2
Interest Rate
Enter the annual interest rate.
- 3
Time Period
Enter the time period in years.
Result: You'll see total interest earned and final amount with simple interest.
How the Calculation Works
Simple interest is calculated as: Interest = Principal × Rate × Time
I = P × r × tVariables:
- I= Interest earned
- P= Principal
- r= Annual interest rate
- t= Time in years
Practical Examples
Example: $5,000 Loan
$5,000 at 5% simple interest for 3 years.
Inputs:
- Principal: $5,000
- Rate: 5%
- Years: 3
Interpretation: Interest = $5,000 × 0.05 × 3 = $750. Total repayment = $5,750. Simple interest is linear and predictable.
When Should You Use This Calculator?
- •Calculating short-term loan interest
- •Understanding simple interest
- •Comparing to compound interest
Limitations and Things to Keep in Mind
Does not compound
Less common than compound interest
Lower returns over long periods
Frequently Asked Questions (FAQs)
When is simple interest used?
Short-term loans, some savings accounts, and bonds. Most modern financial products use compound interest.
Is simple or compound interest better?
For earning interest (savings), compound is better. For paying interest (loans), simple is better, but most loans use compound interest.