The formula this calculator uses
Simple interest
Interest = Principal × Rate% × Time ÷ 100
Total = Principal + Interest
Example: $10,000 at 8% for 3 years → 10,000 × 8 × 3 ÷ 100 = $2,400 interest
Simple interest vs. compound interest
Simple interest is calculated only on the original principal for the entire term, so it grows in a straight, predictable line year after year. This is different from compound interest, which recalculates interest on the growing balance each period, causing it to accelerate over time. Simple interest is common for short-term loans, some bonds, and certain car loans; compound interest is far more common for savings accounts, mortgages, and most long-term borrowing.
How to use this calculator
- Enter the principal (starting amount).
- Enter the annual interest rate.
- Enter the time period in years.
- The interest and total repayment update instantly.
Frequently asked questions
How is simple interest calculated?
Multiply the principal by the interest rate (as a percentage) and by the time in years, then divide by 100.
What's the difference between simple and compound interest?
Simple interest is calculated only on the original principal throughout the term; compound interest is calculated on the growing balance, including previously earned interest, so it grows faster over time.
Does the time have to be in whole years?
No, you can enter a decimal, such as 1.5 for 18 months.
Is simple interest common for loans today?
It's less common for long-term loans than compound interest, but it's still used for some short-term loans, certain bonds, and specific types of car financing.