Simple Interest Calculator
Calculate principal, interest rate, time, or interest amount using the simple interest formula
Calculate Interest
Calculate Principal
Calculate Interest Rate
Calculate Time Period
Calculate Total Amount
Calculation Results
Interest Visualization
Principal vs. Interest
Principal
$10,000
Interest
$2,500
Rate
5%
Time
5 years
Simple Interest Formula
Where: I = Interest, P = Principal, R = Annual Interest Rate, T = Time (in years)
Understanding Simple Interest
Simple interest is a straightforward method of calculating the interest charged on a loan or paid on an investment. Unlike compound interest, simple interest is calculated only on the principal amount.
Key Characteristics:
- Calculated only on the original principal amount
- Does not compound (interest is not added to principal for future calculations)
- Easier to calculate than compound interest
- Commonly used for short-term loans and investments
When to Use Simple Interest:
- Auto loans
- Short-term personal loans
- Some types of bonds
- Certificates of Deposit (CDs) with simple interest terms
- Mortgages with simple interest calculation
Comparison to Compound Interest:
While simple interest is calculated only on the principal, compound interest is calculated on the principal plus any accumulated interest. For long-term investments, compound interest will yield significantly higher returns. For long-term loans, compound interest will result in higher total interest paid.
“Simple interest is the fairest way to calculate borrowing costs for short-term loans.”
This calculator provides estimates only. Actual interest calculations may vary based on lender policies and other factors. For compound interest calculations, use our Compound Interest Calculator.